Social Innovation and Social Enterprises: Toward a Holistic Perspective (Issues in Business Ethics, 62) 3030965953, 9783030965952

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Issues in Business Ethics 62

Antonino Vaccaro Tommaso Ramus   Editors

Social Innovation and Social Enterprises Toward a Holistic Perspective

Issues in Business Ethics Volume 62

Series Editors Mollie Painter, Nottingham Trent University Business School, Nottingham, UK Frank den Hond, Department of Management & Organization, Hanken School of Economics, Helsinki, Finland Editorial Board Members George Enderle, University of Notre Dame, Notre Dame, USA Horst Steinmann, Universität Erlangen-Nürnberg, Nürnberg, Germany Lu Xiaohe, Centre for Business Ethics, Shanghai Academy of Social Sciences, Shanghai, China Daryl Koehn, DePaul University, Chicago, USA Hiro Umezu, Faculty of Business and Commerce, Keio University, Tokyo, Japan Andreas Scherer, University of Zurich, Zürich, Switzerland Campbell Jones, University of Auckland, Auckland, New Zealand

The Issues in Business Ethics series aims to showcase the work of scholars who critically assess the state of contemporary business ethics theory and practice. Business ethics as a field of research and practice is constantly evolving, and as such, this series covers a wide range of values-driven initiatives in organizations, including ethics and compliance, governance, CSR, and sustainable development. We also welcome critical interrogations of the concepts, activities and role-players that are part of such values-driven activities in organizations. The series publishes both monographs and edited volumes. Books in the series address theoretical issues or empirical case studies by means of rigorous philosophical analyses and/or normative evaluation. The series wants to be an outlet for authors who bring the wealth of literature within the humanities and social sciences to bear on contemporary issues in the global business ethics realm. The series especially welcomes work that addresses the interrelations between the agent, organization and society, thus exploiting the differences and connections between the micro, meso and macro levels of moral analysis. The series aims to establish and further the conversation between scholars, experts and practitioners who do not typically have the benefit of each other’s’ company. As such, it welcomes contributions from various philosophical paradigms, and from a wide array of scholars who are active within in the international business context. Its audience includes scholars and practitioners, as well as senior students, and its subject matter will be relevant to various sectors that have an interest and stake in international business ethics. Authors from all continents are welcome to submit proposals, though the series does seek to encourage a global discourse of a critical and normative nature. The series insists on rigor from a scholarly perspective, but authors are encouraged to write in a style that is accessible to a broad audience and to seek out a subject matter of practical relevance.

Antonino Vaccaro • Tommaso Ramus Editors

Social Innovation and Social Enterprises Toward a Holistic Perspective

Editors Antonino Vaccaro IESE Business School Barcelona, Spain

Tommaso Ramus Católica Lisbon School of Business and Economics (CLSBE) Lisbon, Portugal

ISSN 0925-6733 ISSN 2215-1680 (electronic) Issues in Business Ethics ISBN 978-3-030-96595-2 ISBN 978-3-030-96596-9 (eBook) https://doi.org/10.1007/978-3-030-96596-9 © Springer Nature Switzerland AG 2022 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Contents

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Social Innovation and Social Enterprises: Acknowledging Ethical Roots to Boost Positive Societal Change . . . . . . . . . . . . . . . Antonino Vaccaro and Tommaso Ramus

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Organizational Hybridity, Social Enterprise, and Social Innovation: Disentangling Concepts to Advance Theory and Practice . . . . . . . . Marya Besharov

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How Can Cross-Sector Collaborations Foster Social Innovation? A Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anne-Claire Pache, Anne-Laure Fayard, and Marco Galo

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A Behavioral and Cognitive View of Social Innovation . . . . . . . . . . Anna Deréky and Stefano Brusoni

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Leadership in Social Enterprises: A Paradigm for Purpose-Led Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John Almandoz and Yih-Teen Lee

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Spirituality and the Social Enterprise: A Paradox Lens . . . . . . . . . 109 Miguel Pina e Cunha, Miguel Alves Martins, Arménio Rego, and Ricardo Zózimo

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A Holistic Perspective on Social Performance in Social Enterprises: Disentangling Social Impact from Operational Sustainability . . . . . 137 Christina Hertel, Sophie Bacq, and G. T. Lumpkin

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The Adoption of Managerialist Practices in Social Enterprises . . . . 173 Karin Kreutzer

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Being for Profit, Non-profit, or Both? The Risk Advantage of Social Enterprises in the Face of Shocks . . . . . . . . . . . . . . . . . . . 187 Francesca Capo and Francesco Rullani

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Scaling Enterprises: A Critique and Opportunity . . . . . . . . . . . . . . 215 Clodia Vurro and M. Tina Dacin

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Select Conclusive Thoughts and Perspectives to Guide Further Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Antonino Vaccaro and Tommaso Ramus

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251

About the Editors

Antonino Vaccaro is a professor and the academic director of the Center for Business in Society at IESE Business School. He has authored over 20 papers in top journals such as the Academy of Management Journal, the Journal of Management Studies, Research Policy, the Journal of Business Ethics, Business Ethics Quarterly, and Ethics and Information Technology. He serves as section editor for the Journal of Business Ethics and organizes conferences, thematic symposia, and workshops on social innovation and social entrepreneurship regularly in Europe, the USA, Africa, and Latin America. Tommaso Ramus is an associate professor, Fundaçao Amelia de Mello Faculty Fellow in Social Innovation, and the academic director of the Center for Ethics in Business and Economics at Católica Lisbon School of Business and Economics. His research focuses on hybrid organizations, social innovation, and social enterprises. His publications have appeared in the Academy of Management Journal, Organization Studies, Business Ethics Quarterly, the Journal of Business Ethics, and Voluntas.

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Chapter 1

Social Innovation and Social Enterprises: Acknowledging Ethical Roots to Boost Positive Societal Change Antonino Vaccaro and Tommaso Ramus

Abstract In this introductory chapter, we problematize social enterprises and social innovation as ontological distinct phenomena which, however, have a common ethical ground. We advance that this communality needs to be acknowledged and investigated in order to allow for a holistic and deeper understanding of these phenomena. In particular, we suggest that recognizing the ethical roots of social innovation and social enterprises can favor a deeper understanding of how different ethical paradigms influence the functioning of social enterprises and social innovations, while also shedding new light on the tensions that might emerge when business organizations address in innovative ways deep seated societal problems. Based on this acknowledgement we then introduce the different chapters constituting this book. We summarize each chapter, and emphasize how each of them contributes to a better understanding of the ethical challenges and opportunities associated with social enterprises and social innovation. Keywords Ethics · Social innovation · Social enterprises · Social impact · Values · Sense of purpose During the last 10 years, research on social innovation (Tracey and Stott 2017) and social enterprises (Smith and Besharov 2019) has grown dramatically, and has acquired centrality in the academic debate, which is becoming increasingly crowded. Scholars have studied these phenomena from multiple perspectives, including strategy (Marquis and Cuili 2013), entrepreneurship (Grimes et al. 2019), innovation (Seelos and Mair 2017), organization theory (Battilana and Dorado 2010), and business ethics (Smith et al. 2013). Scholars have generated a fast growing research stream that seems to have acquired an autonomy in its own, while also informing and

A. Vaccaro IESE Business School, Barcelona, Spain e-mail: [email protected] T. Ramus (*) Católica Lisbon School of Business and Economics (CLSBE), Lisbon, Portugal e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_1

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contributing to more mainstream fields, such as social movements (Martin 2008), identity (Besharov 2013), institutional theory (Yan et al. 2019), paradox theory (Smith and Besharov 2019), and stakeholder theory (Ramus et al. 2020). In this edited book, we refer to social enterprises as bottom line organizations that seek to address societal problems through business ventures, thus having a dual objective, social and commercial. Examples of social enterprises are work integration social ventures that provide employment opportunities to the marginalized longterm unemployed (Pache and Santos 2013) and impact-investing ventures that deliver debt and equity capital for social initiatives (Hehenberger et al. 2019). Social innovation, on the other hand, refers to new products, services, organizational forms, and business models which address more efficiently and effectively social and/or environmental problems (Ramus et al. 2018). The work of social innovators entails organizational as well as inter-organizational and intraorganizational activities (Tracey and Stott 2017). Low cost prosthetic knees produced with 3D printers (Dumitrescu and Tanase 2016), business models that rely on the work of women in need in emerging economies (Smith and Besharov 2019), and low emission energy micro-producers (Angelidou and Psaltoglou 2017), are just a few examples of the social innovation initiatives rapidly manifesting around the world. A consideration that might quickly surface in analyzing the relationships between social enterprises and social innovation is their substantial ontological difference. The key distinguishing element of social enterprises is the dual nature of the organization – social and commercial – aside from their relative novelty. Conversely, the key distinguishing characteristic of social innovation is the very novelty of products, services, and organizational solutions they offer to address one, or more, social issue (s). It is worth mentioning, that the mathematical sets represented by social enterprises and social innovation can be partially overlapping. Indeed, a social enterprise can be a social innovation if its strategy, organizational model, and operations are new and original in solving a social problem. Alternatively, a social innovation, in the form of either a product or a service, can be completely unlike a social enterprise as it can take the form of any entity: see, for instance, recent market-based solutions to reduce water consumptions by large multinational companies. Despite their differences, an extensive number of studies, both by practitioners and scholars, have typically analyzed social innovations and social enterprises under the same empirical and theoretical umbrella. For example, Ellis (2010) discusses social enterprises and social innovation as key drivers for sustainable development that support a “social megatrend – that is based on [. . .] ethics, responsibility, meaning and the conviction that we are part of the same whole”. Philipps et al. (2019) propose a conceptual model that explores the capability of social enterprises to engage different stakeholders in the creation and development of social innovations. Ramus et al. (2018) empirically analyze how different stakeholders influence the development of new social innovations such as products, services, and processes within social enterprises.

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Despite the aforementioned ontological differences, it is clear that social innovation and social enterprises have a trait d’union – which is the root of, and inspiration for, this book. Indeed, we believe that a critical communality between social enterprises and social innovation lies in their shared ethical roots. Social enterprises are organizational forms intended to address problems, ethical in nature, that affect society. Similarly, social innovations are novel solutions (products, services, organizational structures or components) to solve problems whose nature is, also, intrinsically ethical. Issues such as the integration of disadvantaged people and minorities, providing adequate educational and work opportunities, and preserving the environment, for instance, address, and are related to, fundamental ethical principles of fairness and environmental sustainability (see, e.g., Bull and RidleyDuff 2019). An extensive stream of research has proven that ethical aspirations are key motivational factors for the creation and management of social enterprises and the deployment of social innovation. For example, Vaccaro and Russo (2013) have shown that social enterprises rely more on ethical drivers than financial ones in their decision making, both at strategic and operational levels. Similarly, Lee et al. (2018) have empirically analyzed the role of ethical values in framing, and solving, potential organizational dilemmas in social ventures. In this context, evident and increasing ethical needs of critical stakeholders (e.g., consumers, employees, partners, etc.) are progressively and materially affecting traditional operational, organizational, and strategic decision making processes in for-profit organizations – as well as in some social ventures (see, e.g. Sun 2020; Ramus et al. 2020). Along this theme, Bull and Ridley-Duff (2019) have proposed a conceptualization of social enterprises as ethically-driven organizations along two main dimensions: (1) the moral choice of actors of the economic system toward redistribution and reciprocity; and (2) the social value orientation of individuals toward mutual and/or public benefit. Here, we put forth that the acknowledgement and analysis of the ethical root of social innovation and social enterprises allow for a holistic and deeper understanding of the phenomena associated with their manifestations. Indeed, the ethical dimension plays a relevant role in social entrepreneurship and social innovation, independent of the theoretical or phenomenological perspective taken. For example, ethical questions and dilemmas emerge in the analysis of drivers, mechanisms, and processes of change of organizations interested in pursuing social objectives (Zietsma and Lawrence 2010; Tracey et al. 2011). The ethical expectations of key stakeholders are also very important in the examination of realignment efforts of largely divergent goals and practices (Canales 2013) at the individual (Besharov 2013), group (Ashforth and Reingen 2014), organizational (Almandoz 2012), and field levels (York et al. 2016). Indeed, such realignment efforts are often characterized by a clash between financial/commercialdriven goals and practices vs. ethically-driven ones. Ethical issues also emerge in the characterization of increasingly complex and turbulent environments, in which, social enterprises and social innovations emerge and play a relevant role in institutional change (Vaccaro and Palazzo 2015). Indeed,

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ethical values, beliefs, and expectations have proven to be critical elements that result in institutional complexity and turbulence (see, e.g., Besharov and Smith 2014; Ramus et al. 2018). Ethics has also proven to be a critical variable in discussions about leadership (Besharov 2013), governance, and accounting models (Ebrahim et al. 2014) for managing traditional and innovative social businesses (Gao and Bansal 2013) – or for recognizing, developing, and scaling innovative solutions to deep-rooted societal problems and grand challenges (Tracey and Stott 2017). In fact, ethically-grounded considerations are the guiding elements for distinguishing between the success or failure of social ventures and social innovations (Vaccaro and Russo 2013). As detailed below, acknowledging this shared ethical ground favors a deeper understanding of: 1. how different ethical paradigms (cultural and historical) might shape the structure and functioning of existing social enterprises and favor the development of social innovations 2. the ethical tensions emerging in the management of social enterprises – or in the design and implementation of social innovations 3. how the sense of purpose and transcendent values inspire, motivate, and guide individuals working in social enterprises or those engaged in social innovation efforts (because the sense of purpose, and its transcendent values, inspire ethical values, principles, and reasoning within organizations) 4. how the research on social enterprises and social innovation can contribute to more mainstream research communities, particularly due to the critical role played by ethics-related considerations of important socio-cultural trends such as sustainability, respect for, and integration of, minorities and marginalized people, etc. Firstly, acknowledging the ethical nature of social enterprises and social innovations might boost research by studying how different ethical paradigms shape the management of social enterprises and their capability to develop social innovations. Research has explored how demographic (Dimitriadis et al. 2017) and institutional traits (Mair and Marti 2009) influence the emergence of social innovations; shaping their activities (Grimes et al. 2018) and the kinds of societal issues they address. Yet, engaging in socially-oriented initiatives is not just about making technical, political, and/or managerial decisions (Etzion et al. 2017), it also pertains to an ethicallyrelated vision of the social issues the initiatives aim to address. For example, HIV spread prevention policies vary significantly depending on the ethical paradigm embodied by the actors fighting it – an issue that has received scant attention in the literature. Thus, we still lack a true understanding of how different ethical paradigms influence how social enterprises frame problems, and mobilize resources, to address them in generating social innovations. The second intent of this book is to complement previous research which has remained largely agnostic about the role of ethics in targeting processes and practices associated with the management of social enterprises in the achievement (or modification) of their original missions.

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The role of ethics in the management of process and practices is also relevant for the analysis of design and implementation strategies for social innovation outside social enterprises. The combination and realignment of social and commercial goals – both within a single organization and/or for the development of social innovations – inevitably create ethical tensions. These dynamics generate ethical dilemmas and trade-offs concerning, for instance, the prioritization of stakeholders’ needs and their expectations, the selection of which societal problems to target, and the identification of the most appropriate procedures and strategies necessary to tackle them. These tensions, not only have a technical and managerial dimension, but are intrinsically ethical because they bring into question the actors’ values systems and moral principles. Despite their importance, previous research has left largely unaddressed these ethical tensions, focusing instead on other types of tensions (e.g., Smith et al. 2013). In particular, extensive research adopting an institutional perspective to the study of social enterprises has explained the identity (Besharov 2013), productive (Battilana et al. 2014), organizational (Pache and Santos 2013), and temporal (Reinecke and Ansari 2014) tensions caused by the realignment of social and commercial goals. Previous research has also focused on the individual (Besharov 2013), intra- (Ashforth and Reingen 2014) and interorganizational (Fini et al. 2018) mechanisms, and the processes needed to leverage these tensions into opportunities for learning and innovation (Battilana et al. 2014). Yet, as stated, we lack a body of research on the specific ethical tensions emerging in such contexts. Moreover, the aforementioned different performance, organizational, temporal, identity, and production tensions further generate trade-offs and challenges that are also ethical in nature. For instance, how to manage temporal tradeoffs clearly depends on the value given to short term vs. long-term results (Reinecke and Ansari 2014), while the management of identity tensions is shaped by the importance given by organizational members to the ethical values reflected in their own identities (Mitzinneck and Besharov 2019). These issues are clearly ethical in nature. Without their explicit recognition we run the risk of providing a superficial understanding of managerial practices associated with the management of social enterprises in the achievement or modification, of their mission – or about the design and implementation of social innovation outside social enterprises’ contexts. The third issue addressed by this book concerns how the sense of purpose and transcendent values inspire, motivate, and guide actors working in social enterprises and/or those engaged in social innovation efforts. Hence, the aim of this book is to boost research by disentangling the how and why social purposes and transcendent values activate and motivate individuals working in social enterprises, and/or are engaged in the design and implementation of social innovations. Past research has partially acknowledged the role of cognitive schema (Smith and Besharov 2019) and intrinsic (Borzaga and Tortia 2006) and pro-social (Miller et al. 2001) motivations in accomplishing sustainable social initiatives. However, this research has largely overlooked individual and organizational mechanisms driven by a sense of purpose and by the transcendent values (Cunha et al. 2020) associated with social enterprises and social innovations. We believe that the transcendent dimension, which is strongly related to ethical perceptions and expectations (Melé

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2011), might explain behaviors as motivated by a sense of achievement which goes beyond material elements, and which, instead, appeals to a sense of superordinate purpose and meaning of life (Melé and Fontrodona 2017). This, in turn, impacts human beings’ vision, both as active actors working in social enterprises, and of those engaged in social innovation efforts. The fourth, and last, objective of this book, concerns the positioning of research on social innovation and social enterprises in the broader literature aimed at understanding how to apply managerial and business strategies to address societal grand challenges (George et al. 2016; Ferraro et al. 2015). If social innovations and social enterprises are the emerging results of ethical expectations and attitudes of individuals, organizations, and societies, they might become a reference point for any literature effort interested in addressing ethically-driven phenomena. The latter might include, among several others, central issues in the literature of finance, strategy, and consumer research such as, respectively, research about responsible finance (Hehenberger et al. 2019; Yan et al. 2019); institutional change (Montgomery and Dacin, forthcoming); and responsible consumption (Lee et al. 2018). Specifically, we believe that the identification of ethics as the common ground unifying social enterprises, social innovation, and cognate phenomena, such as corporate social responsibility, sustainability, social change, and social entrepreneurship would favor the growth and institutionalization of a broad research stream studying social issues in management. This common ethical ground would also favor the identification of opportunities for cross-fertilization among research niches that, so far, have developed almost autonomously but go naturally hand-in-hand, in order to become mainstream in the academic discussion. More importantly, it would contribute to finding solutions to deep-seated societal problems and grand challenges. These problems can be addressed through the coordinated efforts of multiple actors – social entrepreneurs, innovators, intrapreneurs, activists, and policy makers – and also of investors, consumers, institutions, social enterprises, corporations, non-governmental organizations, and social movements. Recognizing, and making explicit, the common ethical nature of all initiatives aimed at driving a positive change in society could help develop a comprehensive framework to understand the role of the multitude of actors in “humanizing” organizations, markets, and societies. Before moving on to a brief analysis of the contributions put forth in each Chapter, we offer a final observation, philosophical in nature. This edited book builds philosophically upon an Aristotelian-Thomistic view of business and, in general, organizations (Alford and Naughton 2002; Fontrodona and Sison 2006; Melé 2012). We believe that the “business of business” is not business per se, but is instead the manifestation of human beings (Sandelands 2009) and the natural environment (Vaccaro and Sison 2011) – in their broadest definitions. For-profit and nonprofit organizations are indeed “Communities of Persons” that should take into consideration the respect for the individual and the common good, which includes respecting, with both a present and future perspective, the environment (human and non-human beings), the well-being of future generations, etc. (Melé 2012; Vaccaro and Sison 2011). Individual and organizational efforts of any

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kind, therefore, should take into consideration the centrality of individuals, and the preservation of the earth, as non-negotiable values to guide their actions (Das Neves 2007). Hence, social enterprises and social innovation initiatives represent interesting attempts by individuals, groups, and organizations to handle fundamental principles such as the intrinsic, non-negotiable, value of each human being – and the importance of the common good (Vaccaro and Sison 2011). With this in mind, our effort proposes to continue working on the reconceptualization of any form of business and organizational activity well beyond established paradigms – such as shareholders’ value and other utilitarian models – and, rather, consider assigning more responsibility to the centrality and intrinsic value of individuals, communities, and the preservation of the earth in all its varied dimensions. In each Chapter of this book, we highlight different leading authors in the field of social innovation and social enterprises and their perspectives, in view of, but not constrained by, our Aristotelian-Thomistic understanding of social innovation and social entrepreneurship – as well as our view of ethics as the common ground unifying these phenomena. This book is divided in two, related Parts. As discussed above, the trait d’union between the different Chapters, and between the two Parts, is the role of ethics in social innovations and social enterprises. Part I proposes different and alternative perspectives about the relationship between social innovation and social enterprises, and the challenges and opportunities they face in view of the foundational role of ethics in organizational and social phenomena. Part II analyzes, instead, managerial issues such as effective leadership models, spirituality, performance evaluation, and scaling up. Once again, the theoretical key of Part II is related to the role of ethicsrelated variables in the identification and solution of societal problems.

Part I: Alternative Conceptualizations of Social Enterprises and Social Innovation In Chap. 2, we present the work of Marya Besharov (Oxford University) who provides some important theoretical considerations about our current understanding of the social enterprise phenomenon. More specifically, this foundational Chapter argues that most of the research on social enterprises has focused, so far, on hybrid organization lenses, hence overlooking alternative forms of organizing, strategizing, and resolving problems. Besharov’s work, instead, develops a more comprehensive approach by theoretically disentangling the difference between hybridity, social enterprises, and social innovations. Her proposed perspective follows these three main flows which place center stage a question that is inherently ethical: how to find and implement models and solutions to address social problems associated with fundamental ethical principles – such as the integration in society of marginalized individuals and the support of more environmentally sustainable organizational models.

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In Chap. 3, we present the work of Anne-Claire Pache (ESSEC Business School), Anne-Laure Fayard (New York University), and Marco Galo (ESSEC Business School) who explore how cross-sector collaborations may support and boost social innovation – an issue that has recently gained interest, both in the practitioners’ and the scholar’s communities (e.g., Ramus et al. 2018). Relying on a review of publications in the last 20 years in over 15 renowned journals, both of general management (e.g., Academy of Management) and field-specific (e.g., Journal of Business Ethics), they identify three overarching dimensions that explain collaboration and coordination dynamics of cross-sectoral collaborations and, in turn, how they affect performance. In Chap. 4, we present the work of Anna Deréky and Stefano Brusoni (both from ETH Zurich) who analyze the multi-faced relationships between “traditional innovation” and “social innovation” by introducing and discussing some foundations for a model of innovation based on cognitive and behavioral sciences. Specifically, their model, which is focused on individual decision-making, presents three analytical building blocks which are respectively: (1) an observable choice; (2) a trade-off that sets the context of choice; and (3) social preferences that inform choice. Their discussion, which relies on economic theory classics and recent cognitive research, shows that joint analysis based on these three building blocks supports the development of a general framework that, theoretically, connects “traditional” and “less conventional” social innovation efforts. Interestingly, their contribution highlights the critical role played by ethically-related considerations – such as unavoidable tensions in decisions between self-interest and the interests of others, the capability to implement sound moral reasoning, and individual and organizational ethical values – in their discussion about “traditional” vs. “less conventional” approaches to innovation.

Part II: Organizational Issues Faced by Social Enterprises and Social Innovation Initiatives In Chap. 5, we present the work of John Almandoz and Yih-Teen Lee (both from IESE Business School) who propose a three-dimensional model of integral leadership that might be especially well suited for social enterprises, and which relies on ethically-related variables. The first dimension, achieving complex organizational results, requires leaders to adopt an empathetic sensitivity to opportunities, and the capability to measure and monitor social goals embodying a paradoxical mindset. The second dimension, motivating and developing people, involves balancing two different processes, i.e., learning and inclusion for all critical stakeholders. The third dimension, inspiring a transcendent purpose, requires managers’ commitment to the organization’s social purpose, to making the positive impact of the organization transparent and understandable, and to fostering organizational values – transcendent ones in particular. Relying on the literature on human integral development

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(see, e.g., Mongelli et al. 2018; Vaccaro and Brusoni 2017), their study also presents four organizational principles that might be useful in connecting and integrating the three aforementioned dimensions. In Chap. 6, we present the work of Miguel Pina e Cunha, Miguel Alves Martins, Ricardo Zózimo (all from Nova School of Business and Economics), and Arménio Rego (Católica-Porto Business School) who explore the importance of spirituality and its ethical and, at times, paradoxical nuances in managing social enterprises. Their conceptual model analyzes three critical questions. The first concerns how and why social enterprises are different from “traditional” for-profit organizations and it incorporates strong spiritual dimension(s) which, in turn, support fundamental ethical considerations and ethically-driven behaviors. The second quest explores how spiritual dimensions might emerge in different forms within organizational dayto-day life and drive ethically-driven decisions. The third question analyzes how different expressions of organizational spirituality might emerge in a paradoxical form that requires deep understanding and appropriate management. The discussion presented by the authors also highlights another important point related to the content in Chap. 6: the fact that the spiritual dimension, which affects the mission and vision of social enterprises, can render them much richer, complex, though apparently, paradoxical organizations – an issue that makes leadership efforts much more challenging, if conceptually interesting. In Chap. 7, we present the work of Christina Hertel (EPFL), Sophie Bacq (Indiana University) and Tom Lumpkin (University of Oklahoma) who propose taking a holistic perspective of social enterprises’ performance (Ebrahim et al. 2014) and who develop a conceptual model that introduces three main ethical dimensions and considerations related to the principle of the common good. For the first dimension, their research explores the social performance construct by distinguishing between responsibility – defined as the extent to which the inputs, activities, and effects are in line with common social, environmental, and governance standards (ESG) and social impact – understood as the positive effects on targeted beneficiaries. The second dimension relates to the importance of social performance measurement, the obstacles faced by organizations in making such evaluations, and the related positive externalities on critical stakeholders. Thirdly, the authors propose a new construct, i.e., civic wealth, as variable that better captures social, economic, and community benefits generated by social enterprises in the communities they serve. In Chap. 8, we present the work of Karin Kreutzer (EBS Universität für Wirtschaft und Recht) who wrote a conceptual paper about managerial practices adoption dynamics in hybrid organizations. Relying on an extensive literature review – which includes studies from business ethics, strategy, sociology, nonprofit management – the author explores translation and practice adoption in hybrid and, in particular, social mission-driven organizations. Her study reveals that translational efforts to fit managerial practices in hybrid organizations lead to two main consequences. First, translation and practices adoption are associated with possible significant and substantial changes in the processes originally meant to be implemented. Second, the translation and adoption of managerial practices may have an impact on

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organizational beliefs and identity and may activate processes associated with mission drift. In Chap. 9, we present the work of Francesca Capo (University of MilanoBicocca) and Francesco Rullani (Ca’ Foscari University) who analyze the reaction of social enterprises to unexpected exogenous shocks. Relying on the literature on institutional logics, uncertainty, and turbulence (Lee et al. 2018), the authors show how social enterprises might leverage four critical variables – i.e., knowledge, resources, competences, and relationships – to better adjust to, and manage, changes caused by unexpected exogenous shocks. Their study proposes an interesting comparative perspective that associates and juxtaposes hybrid organizations focused on social missions to traditional for-profit and nonprofits, respectively. Hence, this Chapter shows that, while new perspectives beyond hybridity should be considered (as described in Chap. 2), there are still numerous valuable avenues of investigation grounded on ethical discussions and considerations (e.g., the ethical dilemma represented by a firm’s survival and its capability to boost actual social change) of social innovation and social enterprises phenomena which are decisively worthy of scholarly attention. In Chap. 10, we present the work of Clodia Vurro (University of Milano) and Tina Dacin (Queen’s University Smith School of Business) who propose a novel perspective on a rather controversial issue in the scientific and managerial literature: social enterprises’ scalability. This question is grounded on the analysis of an important ethical dilemma typically faced by social enterprises, i.e., increasing the number of impacted people (scaling up), vs. increasing the quality and variety of their social impact on each affected stakeholders (scaling deep). Their stimulating work proposes an embedded view of scaling social impact in which scaling decisions are related to the extent to which a social venture is both context and resource embedded. Indeed, they show that, while context embeddedness is critical in determining the strategy to be adopted, resource characteristics provide social ventures greater discretion to experiment, and build on, emerging growth opportunities. In Chap. 11 we propose some final reflections on new avenues for further research emerging from this book.

References Alford, H., and M. Naughton. 2002. Beyond the shareholder Model of the firm: Working towards the common good of a business. In Rethinking the purpose of business: Interdisciplinary essays within the Catholic social tradition, ed. S.A. Cortright and S. A. and Naughton, M. Indiana: University of Notre Dame. Almandoz, J. 2012. Arriving at the starting line: The impact of community and financial logics on new banking ventures. Academy of Management Journal 55 (6): 1381–1406. Angelidou, M., and A. Psaltoglou. 2017. An empirical investigation of social innovation initiatives for sustainable urban development. Sustainable Cities and Society 33: 113–125.

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Antonino Vaccaro is a professor and the Academic Director of the Center for Business in Society at IESE Business School. He has authored over 20 papers in top journals such as the Academy of Management Journal, Journal of Management Studies, Research Policy, Journal of Business Ethics, Business Ethics Quarterly, Ethics and Information Technology, etc. He serves as section editor of the Journal of Business Ethics and organizes regularly conferences, thematic symposia, workshops on social innovation and social entrepreneurship in Europe, US, Africa and Latin America. Tommaso Ramus is an associate professor, Fundaçao Amelia de Mello Faculty Fellow in Social Innovation and the academic director of the Center for Ethics in Business and Economics at Católica Lisbon School of Business and Economics. His research focuses on hybrid organizations, social innovation and social enterprises. His publications have appeared in the Academy of Management Journal, Organization Studies, the Business Ethics Quarterly, the Journal of Business Ethics and Voluntas.

Chapter 2

Organizational Hybridity, Social Enterprise, and Social Innovation: Disentangling Concepts to Advance Theory and Practice Marya Besharov

Abstract Extant research on social enterprises as hybrid organizations provides valuable insights for both research and practice. By focusing on the intersection of hybridity and social enterprise, however, this work misses other important challenges and opportunities in social enterprises – beyond hybridity – and also risks overlooking alternative forms of organizing – beyond social enterprise – that contribute to social innovation and impact. As a result, we are left with an incomplete understanding of organizing approaches for addressing deep-rooted societal problems. This chapter sets the foundation for a more comprehensive approach by disentangling hybridity, social enterprise, and social innovation. It then outlines three ways of building an expanded understanding of organizing strategies for social impact: moving beyond hybridity to draw on additional conceptual lenses for understanding social enterprise; moving beyond social enterprise to study alternative organizing models for social innovation, including efforts to address deep-rooted societal problems through initiatives within large corporations and across organizational boundaries; and moving beyond social innovation to anchor on problem domains and consider how and to what extent alternative organizing models effectively address them. Keywords Hybridity · Social enterprise · Social innovation

Introduction: Insights from Studying Social Enterprises as Hybrid Organizations In both research and practice, social enterprise has moved from the margins to the mainstream, with organizations pursuing dual social and business missions now seen as a core topic in management and organization theory, and as a powerful means of M. Besharov (*) Saïd Business School, University of Oxford, Oxford, UK e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_2

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developing novel solutions to pressing social problems. Management journals devote special issues, topic forums, and thematic symposia to social enterprise and related topics with some regularity (e.g., Journal of Business Ethics, 2012, 2019; Academy of Management Learning and Education, 2012; Academy of Management Journal, 2016; Journal of Business Venturing, 2010, 2018). There are also two academic journals are dedicated to the topic: Journal of Social Entrepreneurship, founded in 2010, and Social Enterprise Journal, founded in 2005. On the practitioner side, Stanford Social Innovation Review routinely publishes articles on social enterprises and their role in social innovation (e.g., Battilana et al. 2012; Dees et al. 2004; Besharov et al. 2019a; Smith et al. 2013), and news media mentions of the term and its variants have increased significantly in recent decades (Litrico and Besharov 2019). Scholarly research tends to conceptualize social enterprises as hybrid organizations that combine forms, logics, or identities that would not conventionally go together and to emphasize the challenges and opportunities that arise from social enterprises’ hybrid nature (Battilana et al. 2017; Besharov and Mitzinneck 2020a; Battilana and Lee 2014; Smith et al. 2013). As bottom-line organizations that seek to address societal problems through business ventures, social enterprises often must accommodate multiple identities and values among both leaders and organizational members (Besharov 2014; Miller et al. 2012; Mitzinneck and Besharov 2019; Wry and York 2017) and manage varied performance goals and stakeholder expectations (Cobb et al. 2016; Cobb et al. 2016; Pache and Santos 2010, 2013; Zhao and Wry 2016; Ramus et al. 2018), which tend to be associated with different time horizons (Kim et al. 2019). Differences in identities and values among organizational members can lead to disagreements and conflicts over appropriate strategies and practices, yet they can also spark novel, creative approaches (Jay 2013; McPherson and Sauder 2013; Smith and Besharov 2019). Likewise, it can be difficult to meet divergent expectations from commercially- and socially-oriented funders and advisors, but if these demands are managed effectively, social enterprises may be able gain resources from multiple groups of stakeholders, as evidence from other types of hybrids suggests (Durand and Jourdan 2012; Pache and Santos 2013; Wry et al. 2014). Studies point to organizational design and leadership as key levers by which social enterprises manage these tensions to mitigate challenges and realize potential benefits. In terms of design, some social enterprises adopt differentiated structures with separate units or divisions devoted to business and social mission activities, whereas others develop integrated structures to pursue these activities jointly within a single unit (Albert and Whetten 1985; Battilana et al. 2012; Ebrahim et al. 2014; Greenwood et al. 2011). Each of these approaches has benefits and risks, and more recent work argues for combining aspects of differentiated and integrated structures (Besharov et al. 2019b). For example, some social enterprises hire people who value both business and social missions yet develop separate roles, goals, and metrics to ensure each mission receives dedicated attention (Smith and Besharov 2019). Regarding leadership, studies suggest social enterprises benefit from having leaders who recognize and accept contradictions between social and business missions while

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also seeing synergies and possibilities for mutual benefit, often referring to this combination as a paradoxical or pluralist approach (Besharov 2014; Miller et al. 2012; Smith and Besharov 2019; Smith et al. 2012). These and other insights from extant work on social enterprises as hybrid organizations have proved valuable for both research and practice, and they are being disseminated not just to scholars and educators but also to leaders across the business and nonprofit sectors (e.g., Smith et al. 2012; Battilana et al. 2012; Battilana et al. 2019; Besharov et al. 2019c). Yet, by focusing on the intersection of hybridity and social enterprise, extant work misses alternative forms of organizing that contribute to social innovation and impact, as well as additional challenges and opportunities facing social enterprises. As a result, we are left with an incomplete understanding of the role of organizations in addressing deep-rooted societal problems. This chapter sets the foundation for a more comprehensive approach by disentangling core concepts and outlining directions for future research on alternative organizing strategies for social impact.

Organizational Hybridity, Social Enterprise, and Social Innovation: Some Conceptual Distinctions Developing a more comprehensive understanding of the role of social enterprise in social innovation, and the role of social innovation in addressing deep-rooted societal problems, will require moving beyond the question of how social enterprises manage hybridity. To do so, it is first useful to distinguish more clearly between social enterprise, hybridity, social innovation, and social impact. Hybridity ≠ Social Enterprise Social enterprises are characterized by hybridity in that they bring together within a single organization values, identities, forms, or logics associated with historically distinct market and social welfare institutions (Battilana et al. 2017; Battilana and Lee 2014; Smith et al. 2013). In many social enterprises, both market and social welfare logics are core and equally important to the organization, yet they often offer incompatible guidelines for action. In other cases, however, social enterprises combine market and social welfare logics in ways that are more compatible, or they may prioritize one as central with the other being peripheral (Besharov and Smith 2014). Moreover, the relationship between the constituent elements of a hybrid is likely to evolve dynamically over time, due to changes in strategies and power relations as well as environmental shifts that may alter both centrality and compatibility (e.g., Ashforth and Reingen 2014; Jay 2013; Ramus et al. 2017; Smith and Besharov 2019). Although scholars have characterized social enterprises as the ideal typical hybrid (Battilana and Lee 2014), hybridity manifests in many other empirical contexts as well (Besharov and Mitzinneck 2020a). Global firms engage in sustainability initiatives (Dowell and Muthulingam 2017; Ortiz-de-Mandojana and Bansal 2016),

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charities add commercial activities (Litrico and Besharov 2019), and public sector organizations reform to include business elements (Denis et al. 2015; Polzer et al. 2016). Hybridity is also evident beyond contexts that combine market or commercial with social elements. For example, professional service firms integrate practices from multiple legal traditions (Smets et al. 2012) and across market and community domains (Smets et al. 2015), open source software collaborations combine corporate and voluntary forms of organizing (O’Mahony and Bechky 2008), and biotechnology companies blend academic science and commerce (Wry et al. 2014). Moreover, while many of these hybrids are relatively new and operate in emerging fields, hybridity has been present for decades if not centuries in fields such as health care (Ferlie et al. 2013; Pratt and Rafaeli 1997; Reay and Hinings 2009), the arts (Glynn 2000; Maitlis 2005; Townley 2002), and higher education (Albert and Whetten 1985; Bertels and Lawrence 2016; Kraatz et al. 2010; Perkmann et al. 2019). Insights from studying hybridity across these varied contexts can strengthen our understanding of the challenges and opportunities that emerge within social enterprises. For example, examining non-profits that are launching commercial ventures (Cooney 2006; Litrico and Besharov 2019) or public sector organizations adopting new public management programs (Fossetol et al. 2015; Waring 2015) can illuminate how hybridity develops when it is not present from the start, and when one element is central with the other more peripheral. Studies of sustainability initiatives provide an opportunity to explore how hybridity manifests and is managed when the constituent elements are or become more compatible (e.g., Jay 2013; Mars and Lounsbury 2009). In addition, studies of religious social ventures (Gümüsay and Smets 2020) and renewable energy cooperatives (Mitzinneck and Besharov 2019) can illuminate the dynamics of social enterprises that combine more than two constituent elements. In such cases, there may be a hierarchy of elements, not just a balanced or core-periphery dichotomy. This complicates strategies for mitigating conflict, as supporters of the various elements may disagree not just along one faultline but multiple. Moreover, the implications for action stemming from each constituent element may vary not just in compatibility but also in the extent to which they are “combinable” (Mitzinneck and Besharov 2019), which influences the possibility of coalitions or truces among adherents of each element. Studies of hybridity in other contexts have already started to shed light on these possibilities, and offer important starting points for broadening our understanding of the dynamics of hybridity in social enterprises (see e.g., Besharov and Mitzinneck 2020b; Cappellaro et al. 2020; Greenwood et al. 2010). Social Enterprise ≠ Social Innovation Research tends to treat social enterprise and social innovation as going hand-in-hand, implicitly assuming that social enterprises pursue social innovation and that social innovation is accomplished primarily through social enterprises. Here too, there is value in disentangling concepts. Social innovation refers to refers to new products, services, organizational forms, or business models that address social or environmental problems more efficiently and effectively than existing alternatives (Ramus et al. 2018). Importantly, social innovation can occur within a single organization or across organizational

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boundaries (Tracey and Stott 2017). By studying social innovation primarily within social enterprises, then, we miss other forms of organizing than contribute to social innovation, particularly social intrapreneurship and social extrapreneurship. Social intrapreneurship involves organizing practices and processes for addressing deep-rooted societal problems through initiatives within large for-profit organizations that primarily adhere to a market logic (Tracey and Stott 2017), often from actors who lack formal power (Davis and White 2015). Instead of seeking to create innovation and change by establishing new organizations, social intrapreneurs do so by “leveraging the resources and capabilities of established organizations” (Tracey and Stott 2017). For example, Davis and White (2015) describe how Kevin Thompson worked within IBM to establish a volunteer service program, the Corporate Service Corps, in which teams of IBM employees work with partner organizations in in developing countries to address pressing local challenges around issues such as employment and training, technology platforms, and strategic planning. Organizations can also function as social intrapreneurs within larger firms. After its acquisition by Clorox, for example, Burt’s Bees sought to extend its focus on sustainability to the parent company (Marquis 2010; Story 2008). Similarly, Ben & Jerry’s social and environmental activism may position it to influence parent company Unilever’s approach to issues ranging from packaging and sourcing to internal human resources practices (Austin and Leonard 2008; Edmondson 2014). In these and other instances of social intrapreneurship, social change comes not from the establishment of a new organization, but rather from shifts within existing organizations. Social extrapreneurship involves practices and processes that span organizational boundaries and bring together multiple individuals, organizations, and communities to work toward social change (Tracey and Stott 2017). These efforts may take the form of networks and partnerships that collectively develop novel approaches to addressing deep-rooted societal problems or that provide support for existing organizations that already deliver such approaches. For example, the founders of Aspire, an organization that employed homeless people in a direct marketing business, worked not just to create a single organization but also to establish social enterprise as novel organizational form for addressing social problems in the United Kingdom (Tracey et al. 2011). Social extrapreneurs in Vancouver, Canada facilitated the development of novel solutions for housing two “hard-to-house” populations– the homeless and people with HIV/AIDS (Lawrence and Dover 2015). In these examples, social change comes from efforts that span across individual, organizational, and community actors – in fact, in the case of Aspire, the organization itself actually failed, yet it spurred lasting change in efforts to address homelessness and related issues. Social Innovation ≠ Social Impact Finally, as Seelos and Mair (2017) explain, social innovation on its own does not create social impact. Rather, it takes both innovation and scaling to create social impact, and the two types of activities are quite different. Whereas innovation is characterized by high uncertainty in terms of strategy, resources and capabilities, and knowledge of the problem domain, scaling

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involves low uncertainty in these areas, such that activities are well understood and routine. To be sure, organizations need innovation to lay the groundwork for impact, but it is only when they learn from and refine innovation attempts into routine, low-uncertainty activities that they can effectively address the focal social problem. Given these distinctions, research that primarily examines social innovation – whether through social entrepreneurship, social intrapreneurship, or extrapreneurship – is likely to overlook the role that low-uncertainty, routine activities play in ameliorating deep-rooted societal problems. For example, as Seelos and Mair (2017) explain, the social enterprise Gram Vikas, experimented for decades with various programs and initiatives to promote more inclusive and equitable social systems in rural India. Yet its early innovations had limited impact because leaders did not understand the complex cultural and political dynamics in the communities in which they operated, nor did they build sufficient trust from community members. Only after learning from its failures did Gram Vikas develop a solid understanding of the problem domain in which it sought to work and the relational resources and capabilities to do so. The MANTRA water and sanitation program that it ultimately developed is not only effective in providing clean water but also serves to alter power and social relations between castes in rural villages, thereby advancing the organization’s broader mission of promoting more inclusive and equitable social systems (Mair et al. 2016). While Gram Vikas focused extensively on innovation activities before developing a program that could be scaled for impact, organizations working in different problem domains and with other types of missions, resources, and capabilities may be able to focus more directly on scaling from the start. To pursue its mission to “eliminate needless blindness”, for example, Aravind Eye Hospital performs a focused set of eye surgeries and related procedures, emphasizing high volume and operational efficiency in order to serve millions of patients at a free or significantly discounted rate (Seelos and Mair 2017).

Alternative Organizing Strategies for Social Impact: A Research Agenda The conceptual distinctions between hybridity, social enterprise, social innovation, and social impact lay the groundwork for an expanded research agenda on alternative organizing approaches for addressing deep-rooted societal problems. In this section, I detail three avenues for future research: moving beyond hybridity to draw on additional conceptual lenses for understanding social enterprise; moving beyond social enterprise to study alternative organizing models for social innovation; and moving beyond social innovation to anchor on “wicked” problems and consider how and to what extent alternative organizing models effectively address these problems. Table 2.1 provides a summary.

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Beyond Hybridity: Considering Additional Challenges and Opportunities Hybridity is not the only, or even the primary, challenge for social enterprises. Indeed, as social enterprise becomes a more established category and form of organizing, audience expectations may converge, such that some of the legitimacy and resource dependence challenges associated with hybridity diminish (Glynn et al. 2020; Wry and Durand 2020). Similarly, as hybridity scholars and social enterprise leaders gain greater understanding of and experience with organizational structures, cultures, and human resources practices that accommodate multiple goals and integrate employees with divergent value commitments and identities, the challenges of internal conflict (Besharov 2014; Besharov and Smith 2014) and unintended mission drift (Grimes et al. 2019) may recede. Over time, these developments may better position social enterprises to take advantage of the benefits and opportunities of hybridity without being dragged down by its costs and liabilities. Moreover, even in the short term, social enterprises grapple with other issues besides those that arise from the competing demands of hybridity. Consider for example the issue of assessing organizational performance and social impact. Social enterprises seek to facilitate complex human and social transformations such as breaking the cycle of poverty, building inclusive communities, or improving environmental sustainability. As a result, they face both outcome ambiguity and causal complexity. Ambiguity relates to the vagueness – as opposed to the specificity – of strategic objectives and, as a result, to the difficulty of designing suitable instruments to measure them (Molecke and Pinkse 2017). Complexity refers to the existence of multiple interactions and nonlinear dynamics (Ferraro et al. 2015), which make the identification of clear causal links and the assessment of the efficacy of particular activities or programs difficult (Bromley and Powell 2012; Ebrahim et al. 2014). The context of outcome ambiguity and causal complexity in turn creates both challenges and opportunities for social enterprises. On the one hand, developing practices and tools for assessing organizational performance and impact is likely to be especially difficult. Indeed, some studies suggest organizational performance measurement practices may be inappropriate in such settings, because the difficulty of designing suitable tools leads organizations to instead introduce instruments that control internal activities and monitor financial results (Hwang and Powell 2009). As a result, attention and resources may shift away from activities that fulfill the mission toward those that are more readily measured (Bromley and Powell 2012). On the other hand, measuring organizational performance and social impact may be especially important and valuable in the context of outcome ambiguity and causal complexity. Measurement tools and practices can support an organization’s social change strategy and help it prioritize and effectively respond to funder demands and beneficiary needs (Ebrahim 2019). Relatedly, they may help organizations gain legitimacy (Nicholls 2009), maintain focus on both social impact and financial viability (Ebrahim et al. 2014), and generate effort and commitment from employees

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due the motivational effects of connecting day-to-day work activities with the organization’s ultimate impact (Carton 2018). At present, scholarly understanding of how social enterprises navigate and respond to these issues is limited. Some studies consider how social enterprise leaders deal with performance measurement demands from external stakeholders and explore the implications for legitimacy and resource attainment (Ebrahim 2019; Molecke and Pinkse 2017; Nicholls 2009). Much less is known, however, about how social enterprises’ approaches to assessing organizational performance and social impact may enhance or undermine internal motivation and effort in service of the mission. There are opportunities here for both in-depth qualitative studies and largescale quantitative research, and this research need not be limited to the social enterprise domain in order to be relevant. Outcome ambiguity and causal complexity are also present when corporations attempt to capture and report on their social and environmental performance (Gehman and Grimes 2017; Grimes et al. 2018; Marquis and Qian 2014; Searcy 2012; Yan et al. 2019) and when national and local governments seek to assess and enhance public service outcomes (Kroll 2017; Moynihan et al. 2011). Even within the seemingly well-defined arenas of safety and reliability with for-profit firms, it can be difficult to establish and demonstrate causality (Weick 1987; Weick and Roberts 1993). All of these settings offer opportunities to further understand how social enterprises and related types of organizations navigate the challenges of assessing organizational performance and social impact. Some challenges faced by social enterprises may be even more universal. For example, all entrepreneurial ventures must develop a compelling mission and identity, craft a strategy and organizational design for delivering on this mission, and attract resources (human, material, financial, etc.) to execute the strategy (Alvarez and Barney 2007; Bhide 2003). While not losing sight of what may be unique to social enterprises, research in this area could benefit from connections with other domains of organization and management research that have generated useful insights into fundamental challenges of entrepreneurship and organizational development.

Beyond Social Enterprise: Studying Alternative Organizing Models As noted above, social enterprise represents just one means of organizing for social innovation. Developing a more comprehensive understanding social innovation will require studying not just social enterprise but also alternative approaches and organizing models, particularly social intrapreneurship and social extrapreneurship. Social Intrapreneurship Research on social intrapreneurship is needed at both the individual and organizational levels. As individuals, social intrapreneurs serve as “tempered radicals” who push for change within an existing social system or organization (Meyerson 2004, 2008; Meyerson and Scully 1995). To do so, social

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intrapreneurs adopt a variety of practices, ranging from individual acts of selfexpression that often remain invisible to more visible, collective efforts to mobilize large number of employees around a particular cause or issue (Meyerson 2008). When change initiatives become explicit and public, social intrapreneurs may also engage in “issue selling”, using upward influence, claiming, and impression management to influence how senior leaders in organizations allocate time and attention (Dutton and Ashford 1993), particularly in the context of social and environmental issues (Mayer et al. 2019; Sonenshein 2006, 2016; Sonenshein et al. 2014). In some cases, they may serve as social movement activists as well, targeting corporations from within rather than outside of organizational boundaries (DeCelles et al. 2019). Taken together, extant research on tempered radicals, issue selling, and social movements within corporations offers a starting point for understanding the work of social intrapreneurship at an individual level, yet it also raises new questions. For example, how and to what extent do different tempered radical practices generate social innovation? When and how do social intrapreneurs enlist others to move from individual to collective efforts? How and when does visibility become important? In addition, how do practices vary over time and across contexts? Initial studies of tempered radicals were conducted before Occupy, Black Lives Matter, and #MeToo brought issues of inequality, race, and sexual harassment into mainstream corporate discourse and practice. Moreover, earlier research focused primarily on professional workers in the North American context. New research is needed to illuminate the nature of tempered radicalism and social intrapreneurship in contemporary social and political contexts around the world. Are the practices uncovered in past research still relevant? What new practices do individuals deploy? How do social intrapreneurs act as tempered radicals in manufacturing and service work settings, and what are the associated challenges and opportunities? What does social intrapreneurship entail in institutional contexts with different norms and rules about the role of private organizations and the state in addressing social problems? Finally, across all these settings, we need a better understanding of both the antecedents and consequences of social intrapreneurship. What motivates people to become social intrapreneurs or tempered radicals? What is the role of demographic characteristics and personal experiences? How do these intersect with work roles and experiences? Considering social intrapreneurship at the organizational level raises still more questions. As for-profit social enterprises are increasingly acquired by large global firms (see Austin and Leonard 2008), they have an opportunity to serve as organizational social intrapreneurs. Some acquired firms may even explicitly attempt to adopt such as role. Leaders of Burt’s Bees, for example, sought to spread the company’s sustainability initiatives across parent firm Clorox (Marquis 2010). Ben & Jerry’s maintained its social and environmental activism as a subsidiary of Unilever (Edmondson 2014), creating the possibility for change or at least mutual learning within the parent firm, particularly under CEO Paul Polman who himself became a vocal corporate sustainability advocate (Gelles 2018). While these efforts have been described in teaching cases and the popular press, there is little empirical academic research on the nature and consequences of organizational social

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intrapreneuership (but see Lee and Jay 2015). What strategies and practices do subsidiaries use to exert influence? How do factors such as the structure and leadership of the parent firm influence the emergence and effectiveness of organizational social intrapreneurship? And in turn, how do social intrapreneurship efforts affect policies and practices in the parent firm? Social Extrapreneurship While research that explicitly focuses on social extrapreneurship remains in its infancy within organization and management theory (Tracey and Stott 2017), related streams of work offer starting points for exploring organizing practices that span organizations, the state, and private citizens in the service of developing new solutions to deep-rooted social problems. For example, research on institutional work examines the purposive, reflective efforts of actors to create, maintain, or destroy institutions (Lawrence and Suddaby 2006; Lawrence et al. 2009). Studies of institutional creation and disruption may be particularly relevant for understanding social extrapreneurship, as innovative ideas and practices for addressing deep-rooted social problems often involve changing rather than maintaining existing institutions. In this sense, social extrapreneurship can be understood as a form of institutional entrepreneurship, which involves initiating and implementing changes that diverge from existing institutions (Battilana et al. 2009; DiMaggio 1988). To understand what enables individuals to engage in such efforts, studies of social extrapreneurship might benefit from drawing on Battilana et al.‘s (2009) model of the emergence institutional entrepreneurship, which highlights the interplay of field characteristics and actors’ social position. Going beyond emergence, it will also be important for studies to examine how and to what extent novel ideas and practices that emerge from social extrapreneurship lead to changes in existing institutional systems. In addition, as with social intrapreneurship, organizations as well as individuals can engage in social extrapreneurship. Indeed, many social enterprises pursue missions that require such a role. Consider the social enterprise Gram Vikas, described previously, whose mission is to develop more inclusive and equitable social systems in rural India. To accomplish this mission and change deeply entrenched patterns of social relations, Gram Vikas must collaborate with village leaders and individual citizens (Chowdhury and Santos 2011; Mair et al. 2016). Similarly, to develop alternative energy sources that are environmentally, socially, and economically viable, the cooperatives studied by Mitzinneck and Besharov (2019) must enlist disparate groups of individuals, communities, and businesses. In both cases, the social enterprise is engaging in social extrapreneurship. When organizations serve as social extrapreneurs, they may face tensions between strategies and practices that would preserve and sustain the organization and those that would address the underlying social problem. In its experimentation phase, for example, Gram Vikas created a successful biogas business and could have continued to build biogas plants across India, sustaining and growing its organization and providing a socially valuable product (Chowdhury and Santos 2011). Leaders chose to exit the business, however, since it did not directly help the organization accomplish its broader mission of building more inclusive social

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systems. How do organizational leaders and members perceive and respond to such situations? How can tensions between preserving the organization and remaining true to the mission be mitigated? Alternatively, how might they be reframed or shifted such that survival becomes aligned with social innovation and impact? More generally, what distinct challenges and opportunities arise when organizations, not individuals, are the focal actors and how do organizations navigate them?

Beyond Social Innovation: Anchoring on Problem Domains If organizations create social impact by combining social innovation with scaling – i.e., executing low-uncertainty, routine activities (Seelos and Mair 2017) – we need research that goes beyond studying innovation to also examine whether and how various organizing approaches translate innovation into impact. As a starting point, in this section I highlight three complementary approaches for doing so. First, scholars could examine how particular social entrepreneurship, intrapreneurship, and extrapreneurship initiatives combine innovation and scaling, and whether this combination aligns with the initiative’s mission and strategy, resources and capabilities, as well as the nature of the problem space. As Seelos and Mair (2017) argue, these factors influence how and to what extent innovation and scaling can contribute to addressing the focal social problem. If organizational or initiative leaders lack a clear understanding of the problem domain, for example, extensive innovative activities could provide opportunities for learning. When a problem domain is well understood, however, it may be more valuable to focus relatively more attention on scaling. A configurational approach (Fiss et al. 2013) could be useful here, as it would allow for examination of alternative combinations of innovation and scaling and assessment of their fit with different bundles of organizational characteristics and types of problem domains. Second, and related, research could explore in more depth the nature of impact itself. While many organizing efforts prioritize impact through scale – i.e., expanding a relatively well-defined, narrow solution to a larger number of people or to more geographic areas – others achieve impact through scope – offering a wide the variety of solutions that address different facets of a complex problem (Ebrahim and Rangan 2014; Seelos and Mair 2017). The difference is well illustrated by the contrast between Aravind Eye Hospital and Gram Vikas, both described above. Aravind achieves impact through scale, performing a limited set of eye surgeries to prevent blindness and doing so at an extremely high volume. Gram Vikas becomes deeply embedded in rural communities in the state of Orissa, India, engaging members of all castes in contributing to, designing, building, and governing water and sanitation systems, as well as operating education, sustainable energy, housing, natural resources, and other programs. It works at a much smaller scale than Aravind in terms of the number of individuals reached, but the scope of impact is deeper and broader. As others have noted, no one type of impact is “best”. Rather, different types of problems lend themselves to different impact strategies (Ebrahim and

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Rangan 2014; Seelos and Mair 2017). For example, technical problems that involve economic and cognitive barriers – such as access to low cost eye surgery in the case of Aravind – are well served by narrow solutions that achieve impact through scale, whereas relational problems that entail normative and political barriers are generally best addressed through broad solutions that achieve impact through scope. Third, scholars can shift from anchoring on particular organizing initiatives to instead anchoring on problem domains and assessing how and to what extent different organizing initiatives address a given domain. The United Nations Sustainable Development Goals (SDGs) provide a starting point for this line of work, as they articulate 17 concrete goals related to ending poverty, protecting the environment, and enabling economic and social well-being (George et al. 2016). Each SDG could be addressed through a variety of different organizing approaches, and indeed each one likely requires multiple types of organizing efforts from a range of actors, spanning individuals, private foundations and nonprofits, to corporations and the state. Consider the numerous SDGs related to health and climate, including #2: Zero hunger, #3: Good health, #7: Renewable energy, #11: Sustainable cities and communities, #12: Responsible consumption, #13: Climate action, #14: Life below water, and #15: Life on land. How and to what extent do different social entrepreneurship, intrapreneurship, and extrapreneurship initiatives attempt to move the needle on these SDGs? For example, what role do global consumer packaged goods firms play as they seek to change ingredients, packaging, and supply chain practices? What about NGOs and activists who pressure firms to take action from the outside or mobilize employees internally? What solutions are new social ventures developing and how effectively can these be scaled? Anchoring on the problem domain, as illustrated here by the UN SDGs, prompts us as researchers to consider various organizing initiatives in terms of whether, how, and to what extent they contribute to meaningful social change. In doing so, it invites consideration of top-down efforts from economic, social, and political elites and bottom-up initiatives from marginalized or resource-poor individuals and communities. Studying both types of efforts is especially critical given mounting criticism that elite approaches, however well-intentioned, may serve to perpetuate rather than ameliorate existing inequalities (Giridharadas 2019).

Conclusion Research on social enterprise has expanded significantly in the past decade, and it has made important contributions to both theory and practice. While past work tended to focus on social enterprises as hybrids, and to assume that social enterprises are associated with social innovation, it is now time to expand the scope of research, both theoretically and empirically, in order to continue developing a more comprehensive understanding of the role of organizations in addressing deep-rooted social problems. In this chapter, I have sought to provide a starting point by disentangling core concepts and outlining a research agenda for moving beyond hybridity, social

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enterprise, and social innovation. Doing so will entail drawing on additional conceptual lenses and examining alternative organizing strategies. I hope future scholarship will build on this foundation to advance both theory and practice on organizing for social impact (Table 2.1).

Table 2.1 A framework and research agenda for studying social innovation and impact Key concepts Hybridity

Definitions Combining forms, logics, or identities that do not conventionally go together (Battilana et al. 2017; Besharov and Mitzinneck 2020a)

Social entrepreneurship

Addressing societal problems by creating new organizations to pursue social purposes through business ventures (Battilana and Lee 2014; Smith et al. 2013)

Social intrapreneurship

Addressing societal problems through initiatives within for-profit firms that primarily adhere to a market logic (Davis and White 2015)

Social extrapreneurship

Addressing societal problems by spanning organizational boundaries and bringing together multiple individuals, organizations, and communities (Tracey and Stott 2017)

Illustrative research opportunities What challenges and opportunities emerge in hybrids that are more or less novel and have varying degrees of compatibility, centrality, and multiplicity? How do these challenges and opportunities manifest in social entrepreneurship, intrapreneurship, and extrapreneurship? What conditions facilitate or inhibit the emergence of hybridity? What are the implications for the emergence and sustainability of social entrepreneurship, intrapreneurship, and extrapreneurship? How do social enterprises assess their performance and impact under conditions of outcome ambiguity and causal complexity? What can we learn from entrepreneurship research about developing a mission and identity, designing strategies, structures, and practices, and attracting resources? How do these insights apply to social enterprise? How do social intrapreneurship practices vary across institutional contexts? How do organizations act as social intrapreneurs? What conditions facilitate their emergence? What practices do they adopt to create change? What conditions facilitate the emergence of individual and organizational social extrapreneurs? How do organizational social extrapreneurs manage tensions and align organizational survival with the social extrapreneurship mission? (continued)

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Table 2.1 (continued) Key concepts Social innovation

Definitions Creating new products, services, organizational forms, or business models that address societal problems more efficiently and effectively than existing alternatives (Ramus et al. 2018). Can be accomplished through social entrepreneurship, intrapreneurship, or extrapreneurship

Social impact

Combining innovation and scaling to meaningfully ameliorate societal problems. Requires learning from innovation so as to reduce uncertainty and develop well-understood, routine activities (Seelos and Mair 2017)

Illustrative research opportunities How do social entrepreneurship, intrapreneurship, and extrapreneurship differ in terms of the types of problems they are best suited to address and the types of solutions they are likely to develop? What can we learn about social innovation from research on other types of innovation (e.g., commercial, scientific)? What if anything is distinct about social innovation organizing processes? What enables organizations to learn from innovation and transition to scaling? What different combinations of innovation and scaling are most useful for particular problem domains? For what problem domains is deep versus broad impact most useful? What combination(s) of social entrepreneurship, intrapreneurship, and extrapreneurship are most effective in addressing particular problem domains? How do these forms of organizing interrelate to create impact?

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Marya Besharov is Professor of Organizations and Impact at Saïd Business School, University of Oxford. An organizational theorist with a background in sociology, she studies how organizations and their leaders navigate competing strategic priorities to achieve both social impact and commercial success. Her research has been published in leading academic journals such as Administrative Science Quarterly, Academy of Management Journal, and Academy of Management Review, as well as practitioner outlets such as Harvard Business Review and Stanford Social Innovation Review. Marya received a BA in Social Studies, an MA in Sociology, and a PhD in Organizational Behavior from Harvard University. She also holds an MBA from Stanford University.

Chapter 3

How Can Cross-Sector Collaborations Foster Social Innovation? A Review Anne-Claire Pache, Anne-Laure Fayard, and Marco Galo

Abstract Cross-sector collaborations – defined as collective initiatives involving joint work between any combination of public, not-for-profit, and for-profit actors – are increasingly viewed as valuable to foster social innovation and address some of the world’s most pressing societal challenges. However, they are also recognized to be particularly challenging to implement. This chapter reviews the academic literature on cross-sector collaborations produced in the past two decades to understand what makes these collaborations work and identifies three main organizational-level determinants of their success: the characteristics of the partners involved, the structure of the collaboration, and the boundary practices that are used by those that collaborate. We detail each of these determinants and further leverage general knowledge on collaboration to show how they contribute to the two main mechanisms facilitating collaboration, namely cooperation and coordination. Building upon this review, we discuss the limitations and gaps in the existing literature and point to potential future research directions. Keywords Collaborations · Cross-sector collaborations · Interorganizational partnerships · Cooperation and coordination Over the past decades, the world has seen a steady growth in the number of crosssector collaborations (Van Tulder et al. 2016). Societal issues such as poverty, hunger, and climate change are so complex and of such magnitude that policymakers and social innovators alike recognize that they can hardly be addressed by traditional actors in isolation. In this context, cross-sector collaborations – defined as collective initiatives involving joint work between any combination of public, not-for-profit, and for-profit actors – have emerged as novel and appealing arrangements that A.-C. Pache (*) · M. Galo ESSEC Business School, Cergy, France e-mail: [email protected]; [email protected] A.-L. Fayard NYU Tandon School of Engineering, New York City, NY, USA e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_3

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combine the resources and capabilities of different stakeholders (Rein and Stott 2009; Selsky and Parker 2005; Waddock 1989) to develop solutions to society’s ‘wicked’ problems (Rittel and Webber 1973). However, while these cross-sector collaborations are generally viewed as effective strategies to address society’s challenges (George et al. 2016), they are difficult to implement (Koschmann et al. 2012). Collaboration between actors with different values, goals, and interests is difficult to achieve and often yields elusive results (Bryson et al. 2006, 2016; George et al. 2016). With the rising number of these complex cross-sector initiatives, researchers’ interest in understanding how they successfully operate has been renewed, resuming works that had started in the early 90s (Gray 1989, 1996). During the last two decades, researchers with various disciplinary perspectives have studied both the opportunities and challenges associated with multi-stakeholder collaborations, with an exponential increase in the number of publications in most recent years (Bowen et al. 2010). While this recent growth has provided valuable insights on this inherently complex phenomenon, the body of knowledge that has been developed so far is scattered and does not provide a clear picture of how cross-sector collaborations can be successful and consequently impactful for society. Under the broad umbrella of cross-sector collaboration research, previous research has explored a variety of aspects, such as the factors that lead to the formation of these collaborations, the processes that allow them to unfold, and the challenges they inevitably face. Researchers have also attempted to study the outcomes of these cross-sector collaborations, assessing the value that they create (Austin and Seitanidi 2012a, 2012b; Weber et al. 2017), the value captured by each partner (Kivleniece and Quelin 2012; Le Pennec and Raufflet 2018), the direct impact of the collaborations (Van Tulder et al. 2016), or the systemic changes that they produce (Clarke and Crane 2018; Trujillo 2018). Despite considerable progress made in the past decades to explain the drivers, functioning, and outcomes of these cross-sector collaborations, we still lack a consolidated picture of the determinants of their ability to generate social innovation – i.e., new products, services, organizational forms and business models, which address more efficiently and effectively social or environmental problems (Ramus et al. 2018). With this paper, we aim to address this gap and ask: what factors drive the success of cross-sector collaborations in generating social innovation? We address this question by reviewing the conceptual and empirical papers published about cross-sector collaborations in the past two decades. In particular, we delve into academic publications in the areas of strategy, organization theory, ethics, and public policy in an attempt to acknowledge the various disciplinary perspectives that are mobilized to explain the determinants, content, and outcomes of these collaborations. Taking stock of the knowledge produced by researchers studying different types of multisector interactions – public-private partnerships (PPPs), business-society, public-NGO, and tri-sector partnerships –, we develop an integrative framework of the determinants of success for cross-sector collaborations. Given our interest in identifying factors that actors involved in such collaborations may be able to shape, we center this review on the organizational-level determinants

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of successful cross-sector collaborations. In the following sections, we explain the methodology used to select the reviewed papers and discuss how these articles have interpreted the notion of success in cross-sector collaborations. We then present and integrate the key factors of success identified in past literature. To conclude, we point to important gaps and discuss promising future research directions in the area.

Methods The term ‘cross-sector collaboration’ captures a variety of interorganizational relationships, such as “cross-sector social partnerships; multi-stakeholder collaboratives; cause-based partnerships; social, collaborative, or multiparty alliances; multi- or cross-sector collaboration; social service partnerships; public-private partnerships; business community partnerships; and business or government-nonprofit partnerships.” (Koschmann et al. 2012, p. 332). Hence, we started by defining the scope of our review, which aims to capture the diversity of forms of cross-sector collaborations. Therefore, we define cross-sector collaborations broadly as collective initiatives involving joint work between any combination of public, not-for-profit, and for-profit actors.

Data Collection We restricted our search to peer-reviewed academic articles from the fields of strategy, organizational theory, ethics, and public policy. To select these articles, we identified the ten academic journals from these fields that had the highest impact factors and were also part of the FT50.1 We then conducted a comprehensive search on the publications of these journals from January 2000 to March 2019. We used the following query on the Web of Science scholarly database: SO¼ “Journal Name” AND ((TS¼(cross-sector OR “cross sector” OR cross-sectoral OR intersectoral OR business-government OR enterprise-government OR corporate-government OR public-private) AND TS¼(partnership* OR alliance* OR collaboration* OR project*) AND TS¼(social innovation* OR social issue* OR social problem* OR social cause*)) OR (TS¼ (cause-brand OR government-nonprofit OR business-nonprofit OR enterprisenongovernment OR enterprise/nongovernment OR corporate-community OR corporatenonprofit OR corporate-nongovernment OR company/nonprofit OR company-nonprofit OR company-nongovernment) AND TS¼(partnership* OR alliance* OR collaboration* OR project*)) OR (TS¼(cross-sector OR “cross sector” OR cross-sectoral OR intersectoral OR business-government OR enterprise-government OR corporate-government OR publicprivate) AND TS¼(partnership* OR alliance* OR collaboration* OR project*)))

The FT50 is the research rank developed by the Financial Times. The field of public policy does not have a jounal in this ranking, but we kept in our list the journal from this field with the highest impact factor.

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This initial search yielded 107 articles. To ensure that we would not overlook interesting research, we looked at the reference list and the citations of the two most cited reviews from this initial sample – the articles Cross-Sector Partnerships to Address Social Issues: Challenges to Theory and Practice (Selsky and Parker 2005) and The Design and Implementation of Cross-Sector Collaborations: Propositions from the Literature (Bryson et al. 2006). From this process, we identified and added to our list six journals with recurrent publications on cross-sector collaborations – Organization Science, Entrepreneurship Theory and Practice, California Management Review, Harvard Business Review, International Business Review, and the Journal of Business Research. We then searched through these new entries using the same query as before, which added 28 new articles to our sample. To complete our data collection, we thoroughly looked at the publications that cited the aforementioned reviews to ensure that we did not miss any important paper that used slightly different keywords. Through this final process, we added to our sample ten other papers from journals that were already on our list. In total, our data was comprised of 145 articles.

Data Analysis We analyzed these 145 papers using a rigorous coding scheme. For each article, we thoroughly coded the: title of the paper, name(s) of the author(s), first author’s department and institution, year of publication, number of citations, research question, detailed methodology, theoretical perspectives adopted, empirical setting (if applicable), main findings, outcomes of the collaborations, and the determinants of their success (or failure). Given our focus on the drivers of the success of crosssector collaborations, we narrowed our sample to the articles that uncovered relationships between outcomes (whether positive or negative) and specific determinants of these outcomes. This process yielded a final sample of 114 papers that provided a good overview of the academic literature on the determinants of successful crosssector collaborations. Out of these articles, 40% were conceptual, and, from the empirical ones, almost 70% used qualitative methods. Before presenting our findings, we offer a brief overview of this final data with three important remarks. First, the yearly distribution of the publications shows that the number of articles has grown significantly in the last decade, in comparison to the first 10 years of our data, as illustrated by Fig. 3.1. Second, all together, the papers in our sample have a citation count that is over 14,500. Third, two journals only – the Journal Business of Ethics (45,7%) and the Public Administration Review (18,9%) – yielded the vast majority of the papers in our sample, suggesting that cross-sector collaboration has been more widely studied in the fields of Business Ethics and Public Administration. The count of articles per journal is presented in Fig. 3.2.

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Fig. 3.1 Number of publications on cross-sector collaboration per year since 2000

Fig. 3.2 Number of entries on cross-sector collaboration per journal

Defining Success in Cross-Sector Collaborations Cross-sector collaborations are “the linking or sharing of information, resources, activities, and capabilities by organizations in two or more sectors to achieve jointly an outcome that could not be achieved by organizations in one sector separately” (Bryson et al. 2006, p. 44). Typically, they involve cooperation between partners from the public, not-for-profit, and private sectors. These collaborations are viewed

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as promising approaches to design innovative solutions to complex public problems but are also recognized as problematic and often unsuccessful (Bryson et al. 2006, 2015). In some cases, the collaborations even become part of the very problem they intended to solve (Abramov 2009; Bryson et al. 2006; van Tulder and Keen 2018). A considerable subset of the literature on cross-sector collaborations has thus tried to explore how to make this specific type of collaboration succeed. How to make collaborations work has been extensively studied in social and organizational research – mostly in contexts involving collaborations in a single organization (Bechky 2003; Faraj and Xiao 2006) or between different organizations within the same sector (Levina and Vaast 2008; Metiu 2006). This literature suggests that successful collaboration requires the integration of the activities of multiple individual actors through common understanding and trust (Bechky 2003; Faraj and Xiao 2006; Okhuysen and Bechky 2009). For example, in a manufacturing firm, Bechky (2003) shows that collaboration between technicians, engineers, and assemblers took place when collaborators constructed, using boundary objects, a minimal ‘mutual knowledge’ or ‘common ground’. Building common ground (through the development of specific roles, structures, and practices) has also been found to be important in interorganizational collaborations (Levina and Vaast 2008) or between organizations and online communities (O’Mahony and Bechky 2008). A growing stream of research has also explored inter-organizational collaborations in the context of strategic alliances and joint ventures (Gulati et al. 2012). Building upon the literature on intra-organizational collaboration (Okhuysen and Bechky 2009), this literature shows that successful inter-organizational collaboration requires both cooperation and coordination (Gulati et al. 2012). Cooperation refers to the “joint pursuit of agreed-on goal(s) in a manner corresponding to a shared understanding about contributions and payoffs.” (Gulati et al. 2012, p. 533). In other terms, cooperation can be characterized as partners’ willingness to work together. Trust and common understanding can thus be considered necessary conditions for cooperation, as they facilitate partners’ agreement about the provision and appropriation of resources for the collaborative effort. In contrast, coordination refers to “the deliberate and orderly alignment or adjustment of partners’ actions to achieve jointly determined goals” (Gulati et al. 2012, p. 537). In other words, coordination pertains to partners’ ability to work together and relies on structures and processes that facilitate joint action. Past research on collaboration thus suggests that either within a single organization or across organizations embedded in a single sector, collaboration is facilitated by two interacting mechanisms: cooperation and coordination. Since they involve actors with potentially conflicting cultures and interests (Berger et al. 2004), cross-sector collaborations are particularly challenging instances of inter-organizational partnerships (Bryson et al. 2015). In these contexts, boundaries are more likely to emerge between people, groups, and organizations, which may impede both cooperation and coordination and ultimately lead to collaboration failures. The collapse of the Dress Code, a partnership between Sweden’s largest clothing retailers (H & M, Lindex, KappAhl, and Indiska), several NGOs, and a few local unions, documented by Egels-Zandén and Wahlqvist (2007),

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illustrates how partners with divergent cultures and interests can find it difficult to cooperate and coordinate their actions, ultimately leading to a demise of collaboration efforts despite massive investments. However, empirical studies have also shown that boundaries between diverse actors can be fruitfully bridged. The Derivative Policy Group (DPG) (Faerman and McCaffrey 2001), for example, was a successful cross-sector collaboration that promoted social innovation by changing the ‘rules of the game’ in the financial sector in the United States. The DPG was an initiative of six large financial firms in cooperation with regulatory agencies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The purpose of the collaboration was to develop procedures for risk management and internal controls for largely unregulated financial areas. Despite the intense competition among the firms and the conflict of interests between the companies and the regulatory agencies, in 1995, the DPG released a Framework for Voluntary Oversight. Within this framework, the firms promised to “implement prudent risk management practices” (Faerman and McCaffrey 2001, p. 375) and started to produce quarterly confidential reports on credit risk exposures. In the end, the Derivatives Policy Group became a model for the development of flexible regulation of financial innovation, which became the norm for related policymaking. Some cross-sector collaborations are thus able to emerge, unfold, and successfully achieve their common objectives. Our aim with this paper is to understand what allows them to do so. In this effort, it is essential to acknowledge that success in crosssector collaboration has been conceptualized in different ways. Our review unveils three main interpretations. The first interpretation, prevailing in the literature (Rein and Stott 2009), considers that the mere existence of a cross-sector collaboration tackling a social issue is already a success (e.g., Koppenjan and Enserink 2009; Manning and Roessler 2014; Sagawa and Segal 2000). The second interpretation of success focuses on the efficiency of the collaboration and how they are managed (Bloomfield 2006; Clarke and Fuller 2010; Dunn and Yamashita 2003; Liu et al. 2016). A third interpretation emphasizes the effectiveness of the partnerships and assumes that success means developing social innovation and creating impact (Clarke and Crane 2018; Van Tulder et al. 2016). As we are interested in the broad question of how cross-sector collaborations for social innovation can unfold and thrive, we decided to include in our review papers that embraced any of these three interpretations.

What Drives Successful Cross-Sector Collaborations? Three broad sets of organizational-level determinants of success for cross-sector collaborations emerged from our literature review: the characteristics of the partners involved, the structure of the collaboration, and the boundary-spanning practices used by the actors involved in the collaboration. As we detail these different determinants below, we highlight how each of them contributes to collaboration

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Fig. 3.3 A review of the determinants of successful cross-sector collaborations

through their effect on cooperation and/or coordination (Gulati et al. 2012). Figure 3.3 summarizes these findings.

Characteristics of the Partners Involved in the Collaboration Echoing the literature on collaboration between organizations from the same sector, the research on cross-sector collaboration is unanimous when recognizing the critical role that individuals and teams play in making these collaborations happen and work. Like any other form of collaboration, cross-sector ones rely on the individuals’ ability to cooperate towards shared goals (Montgomery et al. 2012) and coordinate their activities (Rivera-Santos et al. 2017). However, individuals involved in these collaborations, because they adhere to different logics (Ashraf et al. 2017) and embrace different identities (Selsky and Parker 2010) and organizational cultures (Berger et al. 2004), are likely to experience more challenges when it comes to cooperate and coordinate because of differences of vocabularies, tacit assumptions, and performance targets. It is thus more difficult for them to successfully collaborate. While a few studies have described the emergence of cross-sector collaborations from initially confrontational relationships (Arenas et al. 2013; Brugmann and Prahalad 2007), research suggests that when partners hold incompatible logics, cross-sector collaborations are less likely to succeed (Ashraf et al. 2017). This explains why a substantial part of the research on cross-sector collaborations has attempted to identify ways in which specific characteristics of the partners involved may help overcome the hurdles that prevent collaboration. What may allow partners embedded in different sectors to collaborate despite their differences? The research that we reviewed points to four main determinants that influence the partners’

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disposition towards collaboration: their experience, their commitment and style, their reputation, and their fit. Partners’ Experience Quite a few studies stress how the experience of both the individuals and organizations involved in cross-sector collaborations helps the partners to overcome the challenges associated with the diversity inherent to these partnerships. We identified three types of experience: individual experience with multiple sectors, previous experiences between some of the organizational partners involved, and organizational experience with cross-sector collaboration (with different partners). The first type is the experience that individuals might acquire by working in multiple sectors. These hybrid individuals (Pache and Santos 2013) may have worked or volunteered in different organizations from the public, private, or/and nonprofit spheres. As a result, they may have gained exposure to the norms, standards, and cultures of potential partners from different sectors and may even share some of their values. This multisectoral experience, in turn, helps these individuals to understand and build common ground more easily with actors from different spheres. For instance, in the context of the Derivative Policy Group discussed earlier, Faerman and McCaffrey (2001) show that the presence of individuals who had experience both in the banking as well as in the financial regulatory agencies eased communication and negotiations between partners, thus facilitating cooperation. A second type of valuable experience, which has attracted more scholarly attention than other experience factors, emerges from the partners’ previous experience working together. Looking at the formation of the Derivatives Policy Group, Faerman and McCaffrey (2001) show that past relationships between the individuals involved in the collaboration positively influenced the partners’ attitude toward cooperation. They argue, in particular, that a history of trust and good-faith negotiations has a significant role in reducing the perceived risks of being cheated by the partners, thereby encouraging commitment in the relationship. Koljatic and Silva (2008) further explore the mechanisms used by business and nonprofits alliances to reduce the uncertainty during the selection of partners and suggest that a history of interactions with the partners might reduce the need for using these mechanisms. These findings echo the literature on interorganizational collaborations (Gulati et al. 2012) that suggests that familiarity between partners has a critical role in fostering trust and affective interpersonal relationships (Gulati and Sytch 2008), which in turn facilitate cooperation. This familiarity appears to play an even more important role in the context of cross-sector collaborations since it may help partners who hold different norms and values overcome their cognitive distance and engage in joint action. Finally, the partners’ experience with other cross-sector collaborations was described as a factor that helps partnerships succeed (Caldwell et al. 2017). Murphy et al. (2015), for instance, show that partners’ prior experiences with other crosssector collaborations lead to “greater degrees of mission and strategy alignment [between the partners] and, ultimately, greater degrees of value creation” (p. 146) in subsequent collaborations. Several studies uncover the mechanisms driving these results. Morse (2010), for instance, shows that experience with cross-sector collaborations allows partners to develop practical expertise relevant to future

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collaborations, such as how to develop grant applications to finance joint work. In their analysis of the Manchester Super Casino cross-sector partnership, Reast et al. (2010) find that when actors have had previous direct involvement in cross-sector collaborations, they develop tacit and explicit knowledge that they leverage to create routines, rules, and procedures designed to help the coordination of the current as well as subsequent collaborations. Given the inherent complexity of cross-sector collaborations, having previous experience with other such collaborations appears to be a powerful means for partners to develop the skills and processes required to navigate this complexity. Yet a few studies show that the relationship between the partners’ experience with cross-sector collaborations and the outcomes of their subsequent collaborations is more complicated than it seems. For example, a study of four global agri-food companies by Dentoni et al. (2016) suggests that, over time, previous experience with cross-sector partnerships mainly contributes to enhancing a firm’s ability to effectively interact with their partners, while other capabilities, such as effectively sensing, learning from, or changing based on the feedback of partners exhibited diminishing returns to experience over time. Quelin et al. (2019) propose an explanation for this pattern: in public-private partnerships, the impact of the partners’ experience with previous such partnerships on the scope of future collaborations is moderated by the institutional context in which the collaborations occur. They argue that public actors’ prior experiences with private actors increased the private scope of the subsequent partnerships in countries with high-quality institutions, but had the opposite effect when the country had low-quality institutions. Overall, existing research suggests that the partners’ experience is an important driver of success for cross-sector collaborations. Partners’ previous engagement with multiple sectors and prior relationships between the partners seems to facilitate the development of cooperation among the partners by fostering mutual understanding and trust. Prior experience with cross-sector partnerships appears to enable partners to acquire the skills and knowledge required to best organize the work between the diverse organizations and implement coordination processes necessary for success. Partners’ Commitment and Style Partners’ commitment and style are also described as important determinants of collaboration success. Early studies on cross-sector collaborations have shown that the leaders of these collaborations invest heavily in collaborative efforts (McCaffrey et al. 1995) and devote significant personal attention to make them succeed (Huxham and Vangen 2000). More recent works accentuate the style and relational skills of these leaders. In a conceptual paper discussing the micro-foundations of cross-sector social partnerships, Kolk et al. (2010), for instance, propose that participative and transformational leaders are likely to encourage the members of the collaboration to engage in partnershiprelated conversations with people outside of it. They argue that these conversations with external actors might generate positive outcomes for the partnership and society more broadly as they enhance these external actors’ willingness to engage and cooperate with partners.

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Empirical studies echo these theoretical propositions. Reast et al. (2010) show how the charismatic and transformational leadership style of Sir Howard – chief executive of the Manchester Super Casino council – enabled the implementation of feedback and learning loops, institutionalizing learning behaviors in the partnership that facilitated cooperation. Moreover, Faerman and McCaffrey (2001) show that, in the case of the Derivatives Policy Group, the leader’s relational abilities and reputation helped to “legitimize certain ways to deal with a problem, and prod or persuade people to act in ways favoring or inhibiting cooperation” (p. 377). Overall, our review provides anecdotal evidence that the style of the leaders of cross-sector collaborations plays a role in encouraging participation, communication, and dialogue, thereby fostering engagement and cooperation of the members, which, in turn, contributes to the success of the collaboration. Partners’ Reputation Cross-sector collaborations require that members from different worlds join forces and willingly contribute resources to achieve higher aims. Yet there is an inherent risk associated with any collaboration for partners to be taken advantage of and feel like they do not get as much as they should from the collaboration. Therefore, it is important for each partner involved to assess the quality of their potential counterparts in order to decide whether or not they want to invest in the relationship. Research suggests that the different organizations involved in cross-sector collaborations often use reputation as a proxy to assess the quality of prospective partners. Looking at cooperations between corporations and environmental groups, King (2007) proposes that to mitigate ex-post transaction costs, firm-stakeholder relationships “will tend to include stakeholder groups with a valuable reputation for fair dealing and corporations whose environmental reputation is an important asset” (p. 896). Kim and Darnall (2016) further suggest that businesses with a reputation of being sociopolitically proactive – i.e., that “recognize that a social problem exists [. . .] and are willing to commit to collaborative agreements with government” (p. 326) – might be more valuable partners for governments trying to advance public policies. In the context of cross-sector collaborations, where partners belong to different fields, traditional signals of status in one sector may not be easily interpreted by actors from other social spheres. Reputation is thus used as a proxy to assess the quality of potential partners as well as their trustworthiness. It, therefore, impacts the success of cross-sector collaborations by shaping partners’ willingness to cooperate. Partners’ Fit In addition to reputation, past research points to the alignment between the partners as an important driver of cross-sector collaborations’ success. As suggested by Berger et al. (2004), any alignment issue –misunderstandings, misallocation of costs and benefits, mismatches of power, mismatched partners, and misfortunes of time – might lead to mistrust among the partners and considerably harm partners’ willingness and ability to cooperate. While the literature shows that relying on long-term relationships and agreeing on partnership-level objectives that do not compromise the partners’ values are valuable mechanisms to mitigate these alignment issues (King 2007; Sakarya et al. 2012), Murphy et al. (2015) claim

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that the fit between mission and strategy is more critical to value creation than the alignment of values. Overall, these studies suggest that organizations from different sectors are likely to properly collaborate even if they have different values, as long as they share common goals. Past studies have also discussed resource complementarity between partners as a key determinant of collaboration success (Berger et al. 2004; Weber et al. 2017). The different ‘inputs’ (i.e., money, staff, time, capital assets, and commitment) brought by the partners directly affect the ‘impact value chain’ of the cross-sector collaborations (Van Tulder et al. 2016), and therefore the complementarity of the contributions plays an important role in shaping the output, thus the success, of the collaboration. For instance, in their study of collaborations between corporations and social enterprises, Sakarya et al. (2012) suggest that corporations were instrumental in providing financial resources, while social enterprises contributed human resources, organizational infrastructure, knowledge, expertise, and network. Similarly, Weber et al. (2017) observed that in collaborations between social enterprises and partners from other sectors, social enterprises usually contributed expertise on how a specific social need could be alleviated, while their partners provided material and financial resources to facilitate applying this expertise to a social program. This complementarity in resources enabled the partners to create more value for society than any of them alone could have created. Overall, echoing research on collaboration and alliances, the literature on crosssector collaboration shows that the notion of fit between partners is a critical success factor. For these types of collaboration to lead to fruitful outcomes, the partners need to be aligned on the goals that they hope to achieve with the collaboration, as this alignment paves the way for trust and willingness to cooperate. But partners also need to contribute resources that complement each other. This division of resources helps partners to coordinate their work more efficiently, thereby contributing to the success of the collaboration.

Collaboration Structure Multiple studies of cross-sector collaboration emphasize the crucial role of structure in helping define joint objectives and set processes for coordination and problem solving (Berger et al. 2004; Kivleniece and Quelin 2012; Lubell et al. 2017). In the context of cross-sector collaborations, where actors from different sectors are likely to hold different resources and levels of power, structure appears as an important mechanism to reduce the risks associated with the collaborations, mitigate conflicts, and alleviate potential problems related to power asymmetry between the actors involved. Research on inter-organizational collaborations (Gulati et al. 2012; O’Mahony and Bechky 2008) has stressed the importance of developing governance structures that give voice to all partners while avoiding omission or lack of accountability. The literature we reviewed suggests that two dimensions of the collaboration

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structure are particularly relevant: the formalization of the collaboration and its governance. Formalization While the level of formalization of cross-sector collaborations might vary, it is particularly critical – due to the plurality of actors involved in these collaborations – to develop formal agreements between the partners, even when these agreements are complemented by other informal arrangements (Simpson et al. 2011). These formal agreements play important roles in fostering alignment between partners and can provide valuable resources to address divergences when they emerge. They help define the context of the collaboration, formalize joint goals, and set the rules that partners ought to follow to coordinate collective action. The Memorandum of Understanding and Confidentiality formalized between Oxfam and Unilever in Indonesia is an example of an agreement that provided clear objectives and formal rules to define the context of their collaboration (Rivera-Santos et al. 2017). Formal agreements further help in defining a fair allocation of risks and responsibilities between the partners (Kwak et al. 2009), thereby avoiding that “one or both parties come to perceive an unfair distribution of costs and benefits” (Berger et al. 2004, p. 63). Formalizing these agreements, however, is not easy and involves managing and balancing the risks, costs, resources, benefits, and knowledge of all partners involved (Forrer et al. 2010). When established carefully, these agreements may help provide the right incentives to the different members of the collaborations while preventing opportunist behaviors (Koppenjan and Enserink 2009; Reynaers 2014). Importantly, the literature provides nuances when it comes to assessing the importance of formalization in cross-sector collaboration. First, it shows that opportunistic behaviors are common in the context of cross-sector collaborations (Kivleniece and Quelin 2012) and recognizes that formal contracts are not always sufficient to prevent such behaviors (Bloomfield 2006; Gilmour 2012; Hodge and Greve 2007). Second, it identifies the conditions under which formal contracts are particularly needed. The need for formalization seems to be moderated by the degree to which partners belong to different and distant spheres. For instance, in the context of partnerships between multinational corporations and NGOs in subsistence markets, Rivera-Santos et al. (2012) show that when the institutional distance between the original institutions of the partnering organizations is high, formal governance tools, such as contracts and equity, are likely to be replaced by informal ones, including gifts and in-kind contributions. Overall, research shows that the formalization of contracts and bylaws usually helps to design the infrastructure of the cross-sector collaborations. It further suggests that this infrastructure, in turn, fosters effective coordination by defining who does what and how. Previous research also shows that formal agreements can promote cooperation: by instituting fairness and limiting opportunistic behaviors, they support the development of trust in the relationship.

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Governance The topic of governance – i.e., how decisions are made, by whom, and according to which principles – is paramount in the literature on cross-sector collaborations, as it is in the literature on inter-firms collaboration. As hybrid forms of organizing (King 2007; Kivleniece et al. 2017; Quelin et al. 2017), crosssector collaborations often lack organizational elements such as membership, hierarchy, rules, monitoring, and sanctioning (Rasche et al. 2013). Therefore, the actors must acknowledge the hybridity of the collaborations to effectively manage them and create value for society (Quelin et al. 2017). For example, public-private collaborations can improve privately executed services by instilling elements from the public sector such as regulatory control and public monitoring (Kivleniece and Quelin 2012; Rufin and Rivera-Santos 2012). Governance is particularly important because not all cross-sector collaborations include formal contracts. Due to the inherent complexity of these hybrid collaborations, the transaction costs of developing these formal contracts and enforcement mechanisms are usually high (Weber et al. 2017), and, even when they are developed, they are often incomplete (Rivera-Santos et al. 2017; Villani et al. 2017) and conditional to the stability of the surrounding institutions (Rivera-Santos et al. 2012). Hence, to facilitate decision-making, these collaborations often develop governance processes that rely on relational mechanisms to complement the formal contractual safeguards (Simpson et al. 2011) and reduce these transaction costs (Lubell et al. 2017). These relational mechanisms are formal and informal opportunities for partners to engage in interpersonal interactions that help them build trust and develop processes that were not foreseen on their initial contract. Over time, these mechanisms provide the partners with a wider repertoire of possible interactions – such as relying on cultural norms and a shared plan of actions to make decisions (Gazley 2008) –, which can improve task performance (Caldwell et al. 2017) and ultimately enhance the value created by the collaborations (Weber et al. 2017). In some contexts – e.g., partnerships in subsistence markets – relational mechanisms such as informal contracts, in-kind contributions, and gifts can even entirely replace formal agreements (Rivera-Santos et al. 2012). Governance is also essential to manage power imbalance between different actors and avoid unproductive and conflictual collaborations (Berger et al. 2004; Cloutier and Langley 2017; Stadtler 2018). These imbalances sometimes lead to dissatisfaction among at least one of the partners. Some may indeed feel that they have been forced into the collaboration by their more powerful counterpart (Cloutier and Langley 2017) or may perceive an unfair distribution of costs and benefits among partners (Berger et al. 2004). Effective governance plays a critical role in addressing these power imbalances. The governance mechanisms to reduce power asymmetry are often described in the literature as requiring the inclusion of representatives from all partners involved in the collaboration (Reast et al. 2010; Rühli et al. 2017). When governance is designed in such a way, cross-sector collaborations can give voice to the different partners involved, thereby facilitating communication and negotiations. In turn, this helps build trust and mutual understanding between the partners (Idemudia 2009).

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Overall, research suggests that the success of cross-sector collaborations critically depends on the adequate design and management of their governance. The diversity of contexts across different cross-sector collaborations makes it impossible to identify a ‘one-size-fits-all’ form of governance (Rein and Stott 2009). Past research nevertheless shows that carefully designed governance structures and processes can foster both cooperation and coordination. When governance enables the development of both formal and informal interactions between partners, reduces the perceived distance between them, and addresses issues of power imbalance, it contributes to the development of mutual understanding and trust, thereby facilitating cooperation. But governance is also critical to reduce transaction costs and clarify the roles and responsibilities of each partner in contexts of potential power asymmetries, thus facilitating coordination.

Boundary-Spanning Practices Successful cross-sector collaborations require partners from different ‘worlds’ to find common ground to achieve and sustain these agreements (Cloutier and Langley 2017). Yet, these collaborations are characterized by multiple boundaries, which crystallize around differences in partners’ cultures, backgrounds, interests, objectives, routines, or norms (Berger et al. 2004). They can generate misunderstandings and conflicts, thereby potentially threatening the collaboration. Boundary-spanning activities – understood as practices developed to reduce or mitigate differences between partners – are thus essential to reach and sustain cooperation and coordination inside cross-sector collaborations. Our review identifies four key boundary-spanning practices that contribute to the success of these collaborations: brokering, building common ground, facilitating communication, and engaging in continuous learning. Brokering Brokering is an essential practice for forming and sustaining cross-sector collaborations since it enables the mobilization of resources and the development of interactions between otherwise disconnected individuals and organizations. Multiple studies have discussed how the origins of cross-sector collaborations often depend on the efforts of individuals who leverage their relationships to mobilize actors to engage in the collaboration (Koljatic and Silva 2008; Kolk et al. 2010, 2016; Manning and Roessler 2014; Morse 2010). For example, Morse (2010) describes how Bill Gibson, the executive director of the Southwestern Commission – a regional council of governments in North Carolina – was able to connect and mobilize different groups to develop several multisectoral collaborations in his region, such as the creation of sanitary sewer services in the area, using his brokering skills to create political will and access monetary and human resources. Brokering practices can also be enacted at the organizational level. In the context of ‘base of the pyramid’ markets, Webb et al. (2010) show that NGOs can leverage their localized knowledge and generate connections to multiple informal networks that their for-profit partners would not have been able to access otherwise.

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Overall, the practice of brokering in the context of cross-sector collaborations contributes to collaboration success by reducing the perceived distance between disconnected actors and by facilitating the mobilization of resources that would have been otherwise unavailable to some of the partners. In doing so, brokering practices contribute to cooperation because they broaden the pie that the actors involved in the collaboration can draw from and thereby facilitate joint action. Building Common Ground Early research on cross-sector collaborations highlights the practice of building common ground through the definition of shared goals as critical to the success of these collaborations (Waddock 1989). Taking the time to formalize shared goals has been shown to be particularly important during the early stages of the collaborations (Bryson et al. 2016; Clarke and Fuller 2010; Silvia 2018) because they help create alignment among actors that may otherwise hold divergent objectives (Reast et al. 2010; Sakarya et al. 2012). In the absence of shared goals that actively engage all the actors, the collaboration is likely to fail or remain merely superficial. Jamali and Keshishian (2009) indeed show that businesses involved in collaborations with NGOs do not fully engage in the relationship when they do not share a common ambition, thereby holding the collaboration to its most basic philanthropic stage (Austin 2000). Scholars have attempted to understand how common ground can be built between diverse actors and how the partners can identify and separate their own goals from the objectives of the collaboration (Bryson et al. 2016). Several studies have highlighted the role of framing – i.e., the skillful use of a variety of strategies to argue or present a viewpoint or interest – to reconcile divergent values and define shared goals among dissimilar partners (Jay 2013; Klitsie et al. 2018). Le Ber and Branzei (2010), for instance, show that in partnerships between business and nonprofit organizations, it is useful to start with recognizing and contrasting the partners’ different goals and interests. However, to collaborate, these actors often relax the definition of their own goals, making them more flexible and susceptible to a unified collaborative structure. Interestingly, actors do not need to fully abandon their views in this process. Klitsie et al. (2018) indeed show that a successful cross-sector collaboration does not necessarily require a unanimous agreement on a convergent objective. Instead, they show that common ground can also be achieved by maintaining a productive tension between the partners’ different goals. Building common ground thus still leaves some space for ambiguity and reinterpretation (Jay 2013), but it may be easier to achieve it when partners hold logics that, despite their differences, remain compatible (Ashraf et al. 2017). Overall, existing research suggests that building common ground is essential to the success of cross-sector collaborations because of the impact of this practice on both cooperation and coordination processes. By allowing partners to get to know each other and find what unites them despite their differences, building common ground greatly contributes to nurturing cooperation. Once common ground is developed, it provides a platform for partners to design their collaborative strategic plan (Clarke and Fuller 2010) and distribute responsibilities and accountabilities (Silvia 2018), thereby fostering coordination.

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Facilitating Communication Having achieved some common ground does not prevent the emergence of communication issues – i.e., misunderstanding and conflicts. They are in fact one of the most frequent problems faced by cross-sector collaborations (Berger et al. 2004; Koliba et al. 2011; Simo and Bies 2007). Hence, practices that can facilitate communication and help manage conflicts that emerge between diverse partners have been discussed extensively. Cross-sector collaborations require that partners interact, understand each other, and work together, despite their different logics, values, norms, vocabularies, and interests. To ensure that these different voices are heard and taken into account, partners need to develop practices that foster multivocality (Montgomery et al. 2012). In particular, past research shows that collaborations that allow less powerful actors to express their voices are more likely to be effective and sustainable (Cornelius and Wallace 2010). It further suggests that developing ‘spaces’ that enable participation and communication is an effective way to allow all voices to be shared and listened to (Abramov 2009; Reast et al. 2010). In their study of the collaboration between Fair Trade organizations and corporate retailers, Nicholls and Huybrechts (2016) show that “the co-creation of an ‘interorganizational space’ in which logics can be rendered more fluid and flexible than in their core ideal-types” (p. 710) is vital to prevent power asymmetries and misunderstandings between partners, and thus to sustain collaboration. While they may take different forms, these spaces create a context for the development of ongoing conversations that enable partners to share and receive information (Reast et al. 2010). They can be complemented by boundary objects, such as operating standards, certification systems, and communication routines, which help mitigate the distance and foster integration between the different partners (Brugmann and Prahalad 2007; Hahn and Gold 2014; Nicholls and Huybrechts 2016). When internal processes do not suffice to smooth communication and facilitate interactions between partners, cross-sector collaborations sometimes rely on third parties to facilitate communication among the actors. In the context of relationships between businesses and civil society actors, Arenas et al. (2013) show how thirdparty organizations can act as mediators, facilitate interactions, and provide solutions to the challenges experienced in the partnerships, thereby moving the relationship from confrontation to collaboration. Similarly, in their study of the Swiss Cardiovascular Network – a multisector initiative to develop innovative solutions for preventing cardiovascular diseases – Rühli et al. (2017) found that hiring a thirdparty mediator to moderate the plenary and break-out sessions contributed to the development of more integrative outcomes. In some cases, such a facilitative role can be played by individual actors involved in the collaboration. In the smart city of Aarhus, for instance, the CEO of the project played a facilitating role between the ‘idea champions’ – some digitally interested managers – and the political and municipal spheres, thus generating consensus around the shared goals of the project (Snow et al. 2016). Practices facilitating communication enhance the quantity and quality of interactions, foster mutual understanding, and help avoid the emergence of conflicts. When

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conflicts still emerge, they also help resolve them. As such, these practices reduce barriers to cooperation. Moreover, these practices foster information sharing, which facilitates the planning and the organization of work. As such, these practices also foster effective coordination. Engaging in Continuous Learning Learning practices are often discussed in the literature as critical for the success of cross-sector collaborations. Several papers present how specific practices such as monitoring and evaluating outcomes support feedback loops and continuous learning (Esteves and Barclay 2011; Lund-Thomsen 2009; Stadtler 2016; Van Tulder et al. 2016). In turn, these practices allow the actors involved in the collaboration to understand what works and what does not work, as well as assess the overall performance and impact of the collaboration (Esteves and Barclay 2011; Lund-Thomsen 2009). As Quarshie and Leuschner (2018) show, learning, especially in terms of evaluating previous results and diffusing the knowledge, significantly improved the disaster response conducted by multi-sector initiatives in the U.S. from Hurricane Katrina in 2005 to Hurricane Sandy in 2012. Taking one step back and looking at the formation of the cross-sector collaborations, van Tulder and Keen (2018) emphasize the need to include learning mechanisms as early as in the design phase. As these authors suggest, “if the design phase of successful CSPs is primarily aimed at defining a reflective approach, combined with markers for change, it should allow for learning, feedback loops and trust-building” (p. 328). Several studies report on approaches used to assess cross-sector collaboration outcomes, illustrating the diversity of the methods available. Lund-Thomsen (2009), for instance, apply the principles of the Development Assistance Committee – recommended by the OECD as a way of assessing the impact of public-private partnerships – to evaluate a collaboration in Pakistan between more than 200 leather tanneries, local government agencies, and the United Nations Industrial Development. Studying corporate-community collaborations in the mining industry, Esteves and Barclay (2011) propose a framework to evaluate the performance of these collaborations taking the perspective of both partners, thus allowing a holistic assessment of the results. While these approaches can support fruitful learning and potentially improve collaborative outcomes, we still lack clear guidance as to which method is well suited to which type of collaboration. Collectively, previous studies suggest that by facilitating coordination, continuous learning is essential to the success of cross-sector collaborations. Monitoring and evaluation processes enable partners to identify ways in which the collaboration can be made more efficient and thus help them better coordinate their work to achieve joint outcomes.

What’s Next for Research on Cross-Sector Collaboration? Evidence suggests that cross-sector collaborations for social innovation are an emerging trend (Bowen et al. 2010; Sørensen and Torfing 2011). This trend is epitomized in the decision made by the United Nations in its 2030 Agenda to include

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them as one of their seventeen ‘sustainable development goals’ (United Nations 2015). However, as our review of the literature on cross-sector collaboration suggests, how to successfully organize complex and distributed forms of collaboration is still an open question. While sociological and organizational research provides a rich understanding of both intra and inter-organizational collaborations, it tends to focus on situations in which the actors are similar and the boundaries spanned are unequivocal, which differ from the new forms of cross-sector collaborations discussed in this paper. This chapter builds upon a comprehensive review of the research conducted during the last two decades to better understand the organizational determinants that can lead to successful cross-sector collaborations. According to the literature, success is not a common outcome of cross-sector collaboration (Bryson et al. 2006). Yet our analysis suggests that three organizational-level determinants contribute to making it happen: partners’ characteristics (which include partners’ experience, commitment and style, reputation, and fit); collaboration structure (i.e., formalization and governance), and boundary-spanning practices (i.e., brokering, building common ground, facilitating communication, and engaging in continuous learning). In an attempt to develop a general framework of how collaborations may succeed when they involve multiple actors from different social worlds, we build upon the literature on collaboration to discuss how each of these three determinants contributes to cooperation and coordination (Gulati et al. 2012) and ultimately helps build successful collaborations.

Towards a Better Theoretical Integration Our review revealed that the current literature on cross-sector collaboration is scattered across multiple fields and that there are very little dialogue and crosspollination across different areas of research. Moreover, while much of the current work describes challenges or successes of cross-sector collaborations, the notion of ‘collaboration’ remains a blind spot and is rarely theorized. In particular, it seems that most of the research on cross-sector collaboration neither leverage nor build upon the rich literature produced on collaboration in organizational theory and management (Bechky 2003; Gray 1989; Gulati et al. 2012). We, therefore, encourage future researchers to engage with this literature and carefully define how crosssector collaborations fit as a subset of the field of research on collaboration. We believe that it will allow for more fruitful theoretical conversations across fields and will also generate richer theoretical accounts. This paper is a first step in this direction. By explicitly using the distinction between cooperation and coordination proposed by organizational theorists (Gulati et al. 2012), our framework analyzes and makes sense of the different characteristics and practices discussed in the literature on cross-sector collaboration. In particular, it proposes a way to understand better how these different elements contribute to successful collaboration.

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Future research should further explore interactions between cooperation and coordination in creating the conditions for successful cross-sector collaborations. Our current framework proposes to explain how each determinant relates to cooperation and coordination, yet we were not able to discuss in great depth what may drive these different determinants nor how they may affect each other. In addition, future research will need to analyze in more depth the relationships between cooperation and collaboration in the specific context of cross sector-collaborations. Finally, these relationships, including the role of cooperation and coordination in shaping the success of cross-sector collaboration, will need to be explored empirically. Since cross-sector collaboration is an extreme type of collaboration where actors are very different and boundaries are multiple and fuzzy, future research on this topic could generate very valuable contributions to the organization theory literature on collaboration. For example, Okhuysen and Bechky (2009) call for a more detailed investigation of integration mechanisms for coordination. Due to the intrinsically complex nature of these cross-sector collaborations, exploring integration mechanisms in this context would allow us to advance our understanding of these mechanisms and thus contribute to the development of a theory of integration. Future research on cross-sector collaboration may also generate interesting contributions at the intersection of collaboration and other theories such as networks theory, institutional theory, and identity theory. While some of the papers we reviewed drew upon these theories, they did not fully engage with them nor contribute to their theoretical development. Last, our original focus was on cross-sector collaborations for social innovation, understood broadly as collaborations that provide new solutions to our societies’ challenges. Unfortunately, in the studies we reviewed, social innovation was often merely a context; and there was no theorizing about what specific challenges crosssector collaboration for social innovation might face. Yet we know from rich empirical studies on social innovation that the actors involved in creating such innovations face very distinctive challenges that require specific types of resources and interventions (Mair et al. 2016). In this paper, we have assumed that cooperation and coordination, identified as enabling mechanisms of successful collaborations in the context of strategic alliances (Gulati et al. 2012), also operate as such in the context of collaborations focusing on social innovation. Future research will need to systematically test this assumption and investigate the conditions under which these mechanisms may enable collaboration in the context of partnerships that focus on creating not only value for the partners involved but for society more broadly. Using social innovation as a lens through which to understand cross-sector collaboration might provide a way to connect research on social innovation and cross-sector collaboration to general questions in organizational theory. However, such a focus on cross-sector collaboration for social innovation opens up ethical questions and concerns. In particular, it raises the question of whether, and to what extent, we are prepared for the moral ambiguities that are inescapable, yet often subtle features of societally engaged research (de Rond 2020). As organizational and management scholars try to help solve major societal challenges, they are confronted with underserved and vulnerable groups and communities, that their

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research will impact. It is thus important for researchers to be aware of the traces they might leave in the research process. Moreover, as they attempt to evaluate whether or not a given cross-sector collaboration “worked”, i.e. generated positive social impact, engaged scholars ought to rigorously assess whether the initiative actually improved the condition of the underserved and vulnerable groups and communities targeted. Getting at such elusive information is both a methodological challenge and an ethical one, as giving voice to these beneficiaries requires both skills and care. And while there might be no clear-cut guidelines about how to deal with such challenges, reflexivity and intentionality may certainly provide valuable foundations for such “societally engaged research”.

Towards Richer Empirical Accounts While our review highlights several important characteristics and practices, much remains to be known about the determinants of success of cross-sector collaborations. Future research will need to refine, nuance, and identify the boundary conditions of known determinants. It will also need to explore which other factors affect coordination, cooperation, and ultimately success in cross-sector collaborations. Regarding partners’ characteristics, we found in our review that many studies referred to leaders of cross-sector collaborations and some of their traits but tended to stay at the anecdotal level without deeply investigating the specific role and activities of these leaders in the collaborations. In particular, we know little about how the micro-level interactions between partners adhering to different logics play out in the collaboration process. Future research could fruitfully explore these micro-level interactions in more depth to understand how the leaders’ profiles, roles, and activities create the conditions for collaboration success. In addition, it could explore how individuals involved in cross-sector collaborations manage the cognitive dissonances (Festinger 1962) associated with dealing with multiple organizational logics and with individuals from different cultures. We further suggest investigating how this dissonance might affect the evolution, adaptation, and changes in general inside the collaborations (Jermias 2001). Studies on the structure of cross-sector collaborations have so far mainly focused on the role of formal agreements and governance mechanisms in fostering collaboration between partnering organizations. While these findings are certainly valuable, it could be really useful to develop a deeper empirical understanding of how variations in structures might influence specific collaboration outcomes. For collaborations structured around formal contracts, it would be interesting to understand how contracts can be negotiated, especially in contexts of power asymmetry between the partners, as well as how these contracts interact with relationship mechanisms to lead to cooperation and coordination, and in turn, successful collaboration. Finally, it would also be valuable for future research to deepen our understanding of which governance structures might be effective to support cross-sector collaborations. For example, organizational scholars have suggested that the creation of boundary

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organizations (O’Mahony and Bechky 2008) can help partners to manage their divergent interests and adapt their practices to successfully collaborate. Are such forms of governance a relevant option for cross-sector collaborations for social innovation? Past research on boundary practices in the context of cross-sector collaborations is currently the most advanced. However, it is still far from the degree of richness and detail achieved by the literature on collaboration in more homogeneous settings. In particular, this literature has emphasized the key role of boundary objects and boundary spanners in fostering collaboration (Bechky 2003; Carlile 2002, 2004). It classified, for instance, boundary objects across four categories: repositories, standardized forms and methods, objects or models, and maps of boundaries (Carlile 2004). So far, the literature on cross-sector collaborations has mainly explored the second category, emphasizing the importance of using industry standards and certification systems to integrate the partners (Brugmann and Prahalad 2007; Gundling 2014; Nicholls and Huybrechts 2016). Future research could investigate which other types of boundary objects may be developed or used by the partners to improve cooperation and coordination in these cross-sector collaborations as well as what is exactly their role in the process. Future works should also explore the critical role that boundary spanners can play in increasing the efficiency of knowledge exchanges across teams and organizations. The organizational literature suggests that boundary spanners play an important role in facilitating collaboration between different units (Aldrich and Herker 1977; Friedman and Podolny 1992) and suggest that middle managers are particularly useful in these roles as they can mediate the adverse effects arising from status and cultural differences in collaborations (Levina and Vaast 2008). However, we lack such a deep understanding of how individuals inside cross-sector collaborations enact their roles of boundary spanners and how these individuals affect the success of the collaboration. Our review purposefully focused on the organizational-level determinants of successful cross-sector collaborations since most of the literature in this field is centered on this level of analysis. We recognize, however, that both macro-level dynamics and micro-level processes are also likely to shape the success of crosssector collaborations. Future research on cross-sector collaboration could thus investigate both the micro-foundations of these collaborations (Aguinis and Glavas 2012; Kolk et al. 2010, 2016; Murphy et al. 2012) as well as the environmental level factors shaping their success. By studying cross-sector collaborations in ‘their places’, future works can explore how specific contexts, regulations, cultures, or institutional referents (Rueede and Kreutzer 2015; Vurro et al. 2010) affect local actors’ ability to cooperate and coordinate activities, and thus influence the success of the cross-sector collaborations.

Conclusion We began this review by noting the growing interest in cross-sector collaborations for social innovation over the past two decades. While the resulting body of research

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has expanded our understanding in beneficial ways, it is quite scattered and undertheorized – in part because the studies produced pertain to multiple disciplines with little (or no) connections and dialogue. This paper aims to provide a first step in consolidating our current knowledge about the determinants of success in crosssector collaboration by providing a framework informed by organizational theorizing on collaboration (in particular, the conceptual distinction between coordination and cooperation). We believe that organizational theory has much to add to understanding cross-sector collaboration for social innovation. We thus hope that our integrative framework provides a valuable step in that direction.

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Anne-Claire Pache is Professor in Social Innovation at ESSEC Business School in Paris, France. She is the chair holder of ESSEC’s Chair in Philanthropy. She graduated from ESSEC Business School in 1994, holds a Master in Public Administration (2001) from Harvard University John F. Kennedy School of Government and a Ph.D. in Organizational Behavior from INSEAD (2010). Her research interests lie at the intersection of organizational theory and social innovation, with a particular emphasis on pluralistic environments, hybrid organizations, and scaling-up processes in organizations. She has conducted qualitative studies in the field of social enterprises, corporate philanthropy and private foundations. She has authored several books and articles, including in the Academy of Management Review and Academy of Management Journal, Journal of Business Ethics, California Management Review and Leadership Quarterly. She served as Associate Dean for Academic Programs between 2014 and 2017 and is currently Associate Dean for Strategy and Sustainability. Anne-Laure Fayard is Professor at Nova SBE and the chair holder of the ERA Chair in Social Innovation. She is also Visiting Research Professor at New York University. Anne-Laure is an ethnographer of work, whose interests involve collaboration, innovation, design and technology. In particular, she has been studying cross-sector collaboration for social innovation and open social innovation. Her work has been published in several leading journals such as Administrative Science Quarterly, Organization Science, Information System Research and Harvard Business Review. Prior to joining NOVA, Anne-Laure was a faculty member at New York University. She had been faculty at INSEAD in Singapore and France. She has held visiting positions in the Center of Sociology of Innovation at Ecole des Mines, in Design London and the Innovation and Entrepreneurship Group at Imperial College Business School and at the London School of Economics. Marco Galo is a Ph.D. candidate at ESSEC Business School in Paris, France. His research interests lie in entrepreneurship, social innovation, and understanding how cross-sector collaborations may help to address social issues. Marco has an industrial engineering diploma from the Universidade Federal da Bahia and, before joining the Ph.D. program, he was a consultant and entrepreneur in Brazil.

Chapter 4

A Behavioral and Cognitive View of Social Innovation Anna Deréky and Stefano Brusoni

Abstract This chapter starts with a naïve question: can innovation ever not be social? In other words, doesn’t innovation always have a social element? In seeking to answer it, we sketch the foundations of a simple and appreciative baseline model of innovation grounded in the cognitive and behavioral sciences. Our model of individual decision-making requires three analytical building blocks: an observable choice, a tradeoff that sets the context of choice, and social preferences that inform choice. The joint analysis of these building blocks might lead to the development of a more general framework to reconnect the—unfortunately—disconnected discussions about innovation and social innovation. Our argument builds on classic works of economic theory as well as recent developments in the cognitive and behavioral sciences. It problematizes the role of famous entrepreneurs such as Josiah Wedgwood and Henry Ford, and critically reviews recent work in management research focused on corporate social responsibility, business ethics, and hybrid organizations. The chapter concludes by speculating on how we might shift from individual- to organizational-level analysis. Keywords Innovation · Social innovation · Social preferences · Choice · Decisionmaking

Introduction The discussions about innovation and social innovation have grown in parallel, with limited interaction and discrete aims, goals, and audiences. Scholars of social innovation often seem to assume that innovation studies focus exclusively on issues related to technical change and/or value appropriation. For their part, the innovation studies community has discounted the novelty introduced by social innovation scholars in their analysis of how innovation happens in organizations, how it diffuses, and its broader impacts on society (both positive and negative).

A. Deréky (*) · S. Brusoni ETH Zurich, Zurich, Switzerland © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_4

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This chapter intends to reconnect these two important conversations, highlighting similarities and differences and identifying some common ground. Our starting point is a question: can innovation ever not be social? For example, one might argue that cars do address a fundamental social need: personal mobility and, hence, individual freedom. Does that make Henry Ford a social entrepreneur? Hardly. Yet, the answer to our question is hard to ground in standard approaches of social innovation, or social entrepreneurship, which often emphasize the “output” or objective of the innovation process (i.e., the intent to address a social need, such as social or environmental problems) to qualify the “social” part of the discussion. Conversely, standard approaches of classic innovation emphasize the “commercialization” event or the “economic” aspect—that is, the endpoint of the innovation process—without noting the possible societal implications (e.g., pollution), which are assumed to deliver a net positive result. It is our view that while focusing on the visible end of the innovation process has greatly helped measurement, it might limit our understanding of what social innovation is, what social innovators actually do, and how they differ (if at all) from innovators. It is important to note that the discussion about the interplay of economic and social consequences of economic activities (such as innovation) has been present in both practice and theory since before the Industrial Revolution at least. Adam Smith himself considered this issue, as his Theory of Moral Sentiments makes clear. Yet, the recent upsurge of interest in the topic seems occasionally to forget this long and distinguished history. Thus, this chapter intends to go back to basics (historically and theoretically), and propose a shamelessly reductionist (behavioral and cognitive) approach to social innovation. It will leverage recent studies in human and social cognition to develop a roadmap toward a unified understanding of innovation processes and innovation decisions underpinning the pursuit of social goals through the introduction of novelty in decentralized economic systems. Our core idea is very simple. In order to understand what innovation is—or at least, what type of innovation we are talking about—we need to understand what motives and inner values drive the innovator/ entrepreneur. In so doing, we do not aim to distinguish the two conversations, but rather to reconnect them—and, in the process, propose a behaviorally plausible way forward to a more general understanding of the innovation process, and the role of innovation in the quest for a better society. This chapter is organized as follows. First, we provide a simple, even simplistic, summary of the discussion about (social) innovation, going back to the foundational discussion about human motives and social interactions as depicted by classical authors. Second, we build on this discussion to propose a micro-founded, behavioral approach to innovation as a process of choice and decision-making. Third, we reconnect to the management literature in the light of this behavioral approach, suggesting venues to reconcile conflicting results and move this vital conversation forward. Finally, we speculate about where this discussion could take us next.

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Defining Innovation Typically, classic approaches to innovation analysis and measurement include an element of process and an element of output. On the process side, it is commonly acknowledged that innovation is more than mere invention, as it entails additional steps leading to the development of, say, an initial working prototype. Hence, it involves crucial issues of marketing, finance, and design. It is also acknowledged that the innovation process may involve different types of organizations (e.g., corporations, universities) that each contribute their specialized skills. Innovation “happens” when a new product/service or organizational form, or an old one created with a new process, is launched on to the market. Thus, classic approaches to innovation focus on the “commercialization” of the new product/service highlighting an “economic” side, while implicitly assuming that the innovation will deliver a net positive result for society in the long-term. However, if this new product/service (or organizational form explicitly) targets a societal objective (e.g., reintroducing people with substance-misuse problems into the workforce), then this is often called “social innovation”. Otherwise, we would call it simply “innovation”. To give an example, the European Commission Bureau of European Policy Advisors defines social innovations as: “. . .innovations that are social in both their ends and their means. Specifically, [. . .] social innovations [are] new ideas (products, services and models) that simultaneously meet social needs (more effectively than alternatives) and create new social relationships or collaborations. They are innovations that are not only good for society but also enhance society’s capacity to act” (Hubert 2010: 9). In more precise terms, social innovation “refers to new products, services, organizational forms and business models, which address more efficiently and effectively social or environmental problems” (Ramus et al. 2018). But is this good enough? Can we really distinguish innovation and social innovation on this basis? Let us take a (historically long) step back. We posit that this output-based distinction cannot tell us whether some of the most prominent figures behind industrialization, such as Henry Ford, were innovators or rather social innovators. For example, Ford introduced modern manufacturing techniques that vastly increased efficiency and productivity. In the process, he changed power relationships to the disadvantage of workers, as the new techniques took control of operations away from them and gave it to a separate social and professional group (i.e., managers). However, he also provided social benefits to workers, in terms of higher wages, shorter working hours, and training programs. We may regard these benefits as unintended side effects—yet we know from historians that Ford was keenly aware of what he was doing. He ramped up pay in order to change the business model of the industry from one based on compressing salaries to one based on expanding demand. Did he do so out of social concern? Not really—as historians report that Ford himself admitted. For evidence of Ford’s motives, we need look no further than the beautiful and concise biography in the Encyclopedia Britannica (Gelderman 2020). Raising salaries was the solution to keep people working on the conveyor belt

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assembly lines. The parallel decrease in car prices, enabled by Fordism itself, turned Ford’s employees into its own clients. Fordism gave access to mobility to millions. So, all things considered, was Henry Ford a social entrepreneur? Let us look at another example. Josiah Wedgwood was a revolutionary entrepreneur in 1760s Great Britain. He is credited with the invention and institutionalization of the factory system, and created modern marketing techniques, some of which are still used today (McKendrick 1961; McKendrick et al. 1982). So, what kind of innovator/entrepreneur was Wedgwood? In practical terms, the social and technical components of his endeavor might appear to be separate. He demanded high quality that could sell for a high price, and imposed fines and penalties on workers if targets were missed. Some argue that he invented seasonal sales (Schwarzkopf 2019; bear in mind the environmental implications!). On the other hand, at the organizational level, he was engaged in building an ideal factory and provided training for his workforce, implemented health and hygiene measures, and campaigned extensively in support of mass education. The spirit behind his actions was a willingness to innovate despite obstacles. So, would Wedgewood be a social innovator, according to the definition above? If we only consider the output of his actions, we are none the wiser. We believe that the approaches given above are too coarse for our purposes. All innovations have a social impact. Technical change has always been inextricably linked to human progress, in terms of income, health, and life expectancy—as well as with societal ills such as pollution, climate change, and inequality. We need a finer-grained definition of innovation: one that pays explicit attention to “motives”; the objectives that inspire innovators and entrepreneurs to do whatever they do. Without shedding light on such motives, we cannot tell for sure what kind of innovator we are talking about. This is not a new idea, and we explain it now by taking a further long step back into history. The interplay, and relative importance, of economic and social objectives has been present in both practice and theory since at least the Industrial Revolution. Adam Smith’s metaphor of the “invisible hand” is often credited as the first “economic” approach to the analysis of production and innovation. It is based on the idea that “selfish” individuals, pursuing their own self-interest coordinated by market competition, will generate social and economic progress. However, there are two issues with this: first, Adam Smith was not the first to suggest it, and second, he did not, in fact, suggest it at all. On the first issue, the credit should go really to Anglo-Dutch social philosopher Bernard Mandeville. In 1705, he published a satirical poem entitled “The Grumbling Hive: or, Knaves turn’d Honest” (Mandeville 1705). It tells of a swarm of bees who thrive by pursuing their own interests, until one day they turn altruistic—at which point their livelihood collapses. The poem was later republished, along with the essay An Enquiry into the Origin of Moral Virtue, as The Fable of The Bees; or, Private Vices, Publick Benefits. Mandeville was ferociously attacked by his contemporaries, precisely because he suggested that selfish behavior alone can lead to societal benefits, and there is no need to make assumptions about the “good” nature of individuals. It was a powerful message—but it was not one that Smith endorsed. As noted by many, and very

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clearly and concisely by Thobaden, Smith’s view on human nature was far more nuanced than he is given credit for (Thobaden 1976). Smith, who always considered himself a moral philosopher, articulated his views in The Theory of Moral Sentiments. While in The Wealth of Nations, Smith focuses on individuals as economic actors (prone indeed to selfish behavior—hence the need for regulations to protect competition and avoid collusion), The Theory of Moral Sentiments saw him develop a broader analysis of human behavior. Central to his analysis was the concept of “sympathy” which allows humans to care about others: How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he desires nothing from it, except the pleasure of seeing it. And hence it [sympathy] is, that to feel much for others, and little for ourselves, that to restrain our selfish, and to indulge our benevolent, affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety. [. . .] Sympathy, however, cannot, in any sense, be regarded as selfish principle. (Smith 1759 republished in 1966 by Augustus M. Kelley-Publishers; as reported in Thobaden 1976: 11)

In modern-day language, what Smith calls “sympathy” is a close synonym for altruism in prosocial behavior,1 a central concept in the discussion about social innovation. Smith sets out a crucial intuition, based on his analysis of the “motives” (altruism, selfishness, etc.) that underpin human behavior and choice. Mandeville, meanwhile, focused only on aggregate outcomes, assuming selfish behavior. While parsimonious, his model of human behavior suffers from the same problem as many current analyses of innovation and production: he looked at the impact, the output, and retrospectively assumed a logic, a cause. Smith did not make the same mistake. Building on this intuition, we argue that the differences between innovation, as studied in classical approaches, and social innovation can be revealed by looking at the motives underpinning the choices that lead to a certain outcome—and not just to the outcome per se, important though it may be. All innovations have social implications. It is in their nature. It is in the nature of technical change to impact society. Yet, different individuals, different innovators, might make choices on the basis of different motives. In present-day language, we would say that different individuals integrate social and economic values in different ways. By “value,” we mean the subjective value of a choice that determines the weight or priority of different options over each other (Rangel et al. 2008).2 When values conflict, managers play a crucial role in interpreting and enacting organizational goals. For example, integrative solutions are identified by pluralist managers who hold divergent values: “This [identification] occurs when managers who hold both economic and societal values to be important interpret and enact these values for frontline employees through practices of developing integrative solutions, 1

Prosocial behavior describes the individual heterogeneity in contributing to the welfare of others ranging from selfish to altruistic (Bénabou and Tirole 2006). 2 Note that this is a very different definition of “value” from the one often used in management, which is an aspiration to a state of affairs (Finkelstein et al. 2009).

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routinizing ideology, and removing ideology.” (Besharov and Smith 2014: 1486). Organizational members differ in terms of the weights they place on different alternative goals, they differ in their individual subjective values and thus solutions they generate. The overall conclusion is that we believe that a more productive way to look at the different approaches of innovation and social innovation (and, correspondingly, between innovators and social innovators) is by looking at innovation as a (decision) process based on the values of individuals, who place different weights on societal and economic objectives. This is, in our view, consistent with the approach of thinkers such as Mandeville and Smith, who based their different analyses on precisely this aspect of human nature: what is it that determines people’s behavior, their choices, and their decisions? However, we have a supreme advantage over these philosophers: we now have the methods and tools to actually observe such motives. In the next section, we review insights from recent research in cognitive science, behavioral economics, and neuroeconomics, and use them to shift our focus toward how choices are influenced by these different objectives. By exploring what transpires in the minds of innovators, we will distinguish who is an innovator, and who is a social innovator—and how the social component is ultimately derived from individual decisions.

A Behavioral Approach to (Social) Innovation Our overarching aim is to develop a very simple, appreciative baseline model of behavioral innovation that enables us to understand, for example, what kind of innovators Ford or Wedgwood were. To do so, we must attend to three core ideas; only if all three are considered together can we speak of a truly behavioral approach to social innovation. They are: the observation of individual choice behavior; the identification of the specific socioeconomic tradeoff situation in which the choice happens; and the social preferences that show the degree to which individuals consider others, in addition to themselves, while making a choice. The first element (observation of choice) is important to go beyond retrospective analyses. The second element (socioeconomic tradeoff) is important to identify with precision the content of choice and decision. The third element (social preferences) is necessary to understand the motives and values of the decision-maker. Together, these elements might provide us with the framework we need to study innovation and social innovation within a coherent and possibly more general approach. This framework highlights decisions taken at the individual level and the interplay of social and economic objectives. Specifically, it focuses on individual-level behavior in moments of conflicting values, which are traded off according to individual preference. Choice Behavior First, we highlight individual choice behavior. This is important, because merely understanding psychological motives and beliefs is often not

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sufficient to predict choice. For example, it has been shown that managers who individually may be concerned about societal issues such as climate change may not behave in line with their beliefs because market demand, for instance, may leave limited room for maneuver (Wright and Nyberg 2017). To build a behavioral approach to social innovation, we focus on individual decisions that are based on subjective values. We rely on the neuroeconomics literature to define the decision process in the context of “value-based decisionmaking.” In this process, decisions are made through a sequential process that starts with the representation of a problem, followed by the valuation of alternatives. There then follows a step of action selection, in which the different values are compared and prioritized, leading to a choice, which results in the implementation of the decision. The process concludes with outcome evaluation and learning (Glimcher and Fehr 2013; Rangel et al. 2008; Ruff and Fehr 2014). While the steps in the process are not rigid, and the computational processes do not necessarily follow on from each other, this is a useful framework to break down the decision process into testable sub-processes and derive predictions on how individuals encode subjective value and compute value signals for each course of action. Central to this process is the decision-maker, who assigns subjective values to different options, where the values represent predictions of the possible benefits of the options. Subjective values are then compared for subsequent choice. Thus, we focus on subjective values, instead of (or as well as) investigating psychological motives and beliefs. The behavioral approach differentiates innovators and social innovators based on their choices, putting the spotlight on individuals. We investigate decisions in a social context. Social decisions are most relevant when observing individual choice behavior; they consider the desirability of outcomes to both self and others (e.g., other individuals, or society in general). And managers often take decisions not only for themselves, but also for others. Social decisions have a social component in addition to a “self” component that concerns one own’s benefit; examples include deciding about others, for others, or jointly with others (Ruff and Fehr 2014). Social decisions involve different strategies that differ in the social desirability of their outcomes—for example whether a decision-maker decides to keep more profit to herself, or invests more in sustainable energy sources. To make a clear distinction in terms of the type of decision, we differentiate between social and moral decisions. Moral decisions are specified with regard to undesirable outcomes, while social decisions are specified with regard to weighting personal and social benefit (Singer and Tusche 2014). This distinction is important, because it brings us closer to the type of decision that we think is most relevant to social innovation. We believe that social decisions are the types of decisions that Ford and Wedgwood were faced with: fostering more manufacturing techniques that vastly increase profit (deciding for oneself) or providing more social benefits to workers (deciding for others). Socioeconomic Tradeoffs Second, we believe that the context most interesting to study choice, and the most relevant for management research, is characterized by socioeconomic tradeoff situations, in which a decision-maker must decide how to

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trade off social and economic objectives. We believe that managers play a crucial role in interpreting and enacting organizational goals in the presence of conflicting values. Typically, business managers need to consider both profit margins and societal or environmental impact when making their decisions, and often weigh these factors against each other. Examples include pharmaceutical managers who must weigh potential profits against pricing a drug at an affordable level (Carreyrou 2007), or automotive managers who must decide whether to profit by selling (supposedly) carbon-neutral cars or invest in reducing carbon emissions (Topham et al. 2015). Management scholars have made a bold and important move to acknowledge the everyday-presence and thus huge importance of socio-economic tradeoffs in organizations which have been neglected for the past decades (Battilana et al. 2020). Identifying and investigating the outcomes of socioeconomic tradeoffs is important, because they reveal the underlying prioritization mechanism of individuals regarding different economic and societal objectives. There are some specific situations in which economic and societal benefits are aligned, and there is no tradeoff for managers to consider. This occurs, for example, if the long-run societal gain dimension of the decision is aligned with short-term economic profit.3 However, given the variability of tradeoffs that managers face in a complex organizational environment, such alignment is rare. Social Preferences Finally, individuals have heterogeneous social preferences when making choices. Without understanding why individuals give priority to certain economic or societal objectives, we cannot explain why different decisionmakers’ choices leads to differential economic and societal decision outcomes over the same tradeoff. Social preferences such as fairness, prosociality, and trust play an important role when individuals take these types of decisions. A vast body of experimental behavioral research has shown that individuals exhibit social preferences, which means that they consider not only their own welfare in their choices, but also the welfare of others (Bénabou and Tirole 2006; Charness and Rabin 2002; Fehr and Camerer 2007; Fehr and Fischbacher 2003; Fehr et al. 2005; Levitt and List 2007). Social preferences have concrete economic and social implications for decision behavior, depending on how an individual chooses to balance social and economic objectives. This is important, because social preferences let us understand the cognitive costs and benefits of social decisions (Fehr and Krajbich 2014). Adam Smith highlighted the importance of social preferences as early as The Theory of Moral Sentiments (Ashraf et al. 2005). Social preferences are an important characteristic of an individual’s behavior, and indicate how much they care—

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This is an important aspect because it has been shown that long-term-oriented, sustainable organizations can outperform their counterparts (Eccles et al. 2014; Flammer 2018). The shortvs. long-term aspect of decisions has received considerable attention in the cognition and neuroscience literatures (Doya 2008; Rangel et al. 2008), and it has been shown that individuals who are more prosocial are more likely to consider the future consequences of a decision (Van Lange et al. 2013).

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positively or negatively—about others’ material payoffs or wellbeing (Fehr and Krajbich 2014). Several experiments and field studies confirm that social preferences change standard decision-making models (e.g. Bénabou and Tirole 2003, 2006; Fehr and Schmidt 1999). Amongst the various social preferences, we focus on prosociality, because it highlights the spectrum and heterogeneity in individual altruism and selfishness (Bénabou and Tirole 2006) and is considered as an essential building block to understand human cooperation. We define prosociality as the degree to which a costly act confers economic benefits on other individuals, or on society more generally (Fehr and Fischbacher 2003). Prosocial behavior ranges from selfish to altruistic (Murphy and Ackermann 2014) and can be differentiated as altruistically motivated, norm-motivated, or self-reported prosocial behavior (Böckler et al. 2018). In this chapter, we consider prosocial behavior as altruistically motivated prosocial behavior, in types of decisions where a single decision-maker chooses between allocating business profit and societal gains. In such situations, the decisionmaker does not expect any reciprocal action from the recipient, so reciprocal behavior, fairness considerations, and trust do not affect the decision.4 Thus, we believe that prosocial preferences are important to consider when trying to balance profit-maximizing behavior with social motives. To summarize, we have sketched a simple, baseline model of behavioral innovation built on three core elements of value-based decision-making that account for the behavioral approach to social innovation: choice, socioeconomic tradeoffs, and prosocial behavior. We believe that these elements are necessary, and possibly sufficient, to investigate how individuals and groups of individuals deal with these tradeoffs in organizations (Levinthal 2011; Powell et al. 2011). This behavioral approach has the potential to significantly add to the rich management literature, which has dedicated significant resources to understanding the individual-level mechanisms behind the pursuit of social and economic goals. While these different streams of literatures have for the most part focused on hypothetical decisions (along the lines of “What would you do in this situation?”) and abilities and motives, our approach adds a concrete behavioral twist. This is important, because it points towards specific concrete decisions and contexts to study social innovation, emphasizing the constant interplay of social and economic choices. Also, it allows us to focus on how individual-level behavior is changed in moments when values come into conflict. In the following section, we investigate the existing management literature with regard to the three aspects of choice, socioeconomic tradeoffs, and prosocial behavior, in order to suggest venues for conflicting results and move the conversation forward.

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However, we would like to stress that these are also important social preferences, and future research would be important to frame them in the context of social innovation and innovation.

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Trading Off Societal and Economic Objectives The management literature has a longstanding history of examining prosociality as an individual motivation or ability. As early as 1990, Herbert Simon underlined that different motivations, such as altruism, are important explanatory variables for individual loyalty to the organization (Simon 1990). Altruism has been identified as a motivating factor in organizations, which causes employees to care about making a positive difference to others (Grant 2007). Individuals act prosocially in situations when they can help coworkers with job-related matters or volunteer for additional assignments (Brief and Motowidlo 1986). Employees working in organizations that launch social initiatives are more likely to continue to work in the same organization (Bode et al. 2015), and if the work has a direct effect on beneficiaries, they are more likely to be aware of the impact of their actions (Grant 2007). Prosociality has also been shown to increase individual performance and productivity (Grant 2008). Among the various streams of management literature that have taken an interest in prosociality and socioeconomic tradeoffs, we focus on those that offer the richest accounts of prosociality: corporate social responsibility, business ethics, and hybrid organizations. While socioeconomic tradeoffs and prosociality—or certain aspects thereof—have received considerable attention, these three streams have mainly examined prosociality as either an individual characteristic, a motivation, or an ability (e.g. Besharov 2014; Grant 2007; Mazutis and Zintel 2015). While we believe that individual characteristics, motivations, and abilities are important antecedents of prosocial behavior—and, thus, organizational life—we also believe that this approach can be improved. Until the specific characteristics, motivations, or abilities predicting social intentions are clearly placed within a social-decision context, it is very hard to differentiate between intentions (what I think I would be willing to do) and behaviors (what I actually decide to do), and thus the consequences of a choice. On the other hand, considerable attention has also been paid to the different types of socioeconomic tradeoffs that social innovators and entrepreneurs face, but very little work has systematically connected individual social preferences in these contexts. This is crucial to the development of a behavioral approach, for two reasons. First, in the absence of knowledge about how preferences influence individual behavior in a specific context, it is impossible to build consistent and behaviorally plausible knowledge about the basis of cooperation of individuals, teams, and organizations. We believe that motivations explain what strategies individuals may use to solve specific problems (e.g., what it is that drives their prosocial behavior), and abilities explain what individuals can or cannot do in specific situations (e.g., how leadership styles may affect prosocial behavior). Yet, we need to connect motivations and abilities to concrete choice behavior in order to observe, and evaluate, consequences. In other words, just because managers may have specific characteristics, motivations, and abilities that are antecedents to prosocial behavior, it does not mean that they act prosocially or selfishly as a matter of fact (see also Wright and Nyberg 2017).

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Second, choice behavior provides a more plausible view of individual heterogeneity in prosocial preferences (ranging from altruistic to selfish). This is important, because there are different types of managers within organizations, with heterogeneous preferences, and by neglecting this heterogeneity we possibly miss out on different behavioral mechanisms (Besharov 2014). Thus, we would like to highlight how individuals prioritize choices (given their social preferences) while making decisions. This is important, because it enables us to understand the choices underlying the decision process in a concrete way. Literature on Corporate Social Responsibility and Business Ethics The corporate social responsibility and business-ethics literatures have extensively investigated socioeconomic tradeoffs, clearly highlighting their importance. This research has painted a rich picture of how organizations may seek profit while achieving collectively beneficial outcomes (e.g. Beckmann et al. 2014). However, this literature stream has mainly focused on socioeconomic tradeoffs at the level of organizations—thus, in the context of firms’ decisions rather than individuals’. In terms of firm decisions, the main questions that have been investigated are whether, under resource constraints, firms need to forego profits in order to contribute to the societal good (Haffar and Searcy 2017), and whether considering these two aspects as opposing or interdependent objectives helps firms to identify, prioritize, and address social issues related to their general business context (Porter and Kramer 2006). Various approaches have been proposed for how firms need to interpret profit versus societal objectives, such as win-win interpretations to reconcile goals, interpretations as tradeoffs for choosing among goals, integrative approaches to weight goals equally, and a paradox approach to embracing opposing goals (Hahn et al. 2010; Figge and Hahn 2012; Van der Byl and Slawinski 2015). This stream of work is a very productive starting point to investigate socioeconomic tradeoffs. However, we suggest that we need to pay more attention to the role of individuals in taking such decisions. It is vital to investigate socioeconomic tradeoffs in the context of social decisions too, in order to consider how different social and economic goals are attended to. For example, does it matter how much time managers spend attending to social and economic objectives, given a certain level of prosociality (similar to Fiedler et al. 2013)? Do choices change depending on whether the decision is taken deliberately or in a more automated manner (e.g., can socioeconomic tradeoffs be treated differently when decisions are processed more automatically versus more deliberately, similar to Laureiro-Martínez and Brusoni 2018)? How do beliefs about the interpretation of the situation (e.g., win-win or integrative) and individual heterogeneity in the level of prosociality affect choices in socioeconomic tradeoff situations? Of course, individual decision-makers have also been recognized as important agents to introduce social change in their organizations (e.g. Allet 2014). Overall, the corporate social responsibility and business-ethics literatures agree that, at the individual level, tensions manifest as a choice between self-interest and the interests of others (Beckmann et al. 2014; Schwartz and Bilsky 1987). It has been suggested that individual motives, traits, and values, as well as the social context, all matter for

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predicting socially responsible behavior (Crilly 2013; Hemingway and Maclagan 2004). For example, there is a long-established relationship between how various leadership motives, traits, and values influence strategic decisions and corporate social responsibility (Finkelstein et al. 2009; Mazutis and Zintel 2015). Two comprehensive reviews of empirical work on leadership and corporate responsibility identify numerous constructs connected to concern for others (Finkelstein et al. 2009; Mazutis and Zintel 2015). For example, the cultural value of collectivism is thought to be involved in contexts where the collective distribution of values or the cohesiveness of proximate collectives is at stake (Finkelstein et al. 2009). Also, moral reasoning, defined as the ability to appreciate others’ perspectives (Crilly et al. 2008; Stahl and Sully de Luque 2014), is an important antecedent for other-regarding behavior, while empathy is seen as an emotional response defined as the perceived welfare of others (Stahl and Sully de Luque 2014). Economic reasoning is described as the intention to behave in a socially responsible manner, but only with the promise of a financial return (Crilly et al. 2008). These studies focus on different characteristics that describe managers and other leaders who might implement sustainable decisions in organizations, but leave untouched the question of whether the manager does, in fact, take sustainable decisions. Again, we believe that these are important first steps in identifying social preferences and prosocial behavior. We think that collectivism, moral reasoning, empathy, and economic reasoning as defined above have the potential to contribute to prosocial behavior. However, we also find the constructs are inconsistently used with regard to social decisions and concrete behavior. To give some examples: Moral- and social decisions are equally important but manifest in different decision-contexts; social decisions concern socially desirable outcomes, while moral decisions concern undesirable ones. Empathy, is an affective state in a decision context, and describes the tendency to share and understand another person’s feelings and emotions, as opposed to a perception regarding others’ welfare (Singer and Tusche 2014). It is believed to be one of the psychological mechanisms underlying prosocial choices (Tusche et al. 2016). Thus, we think that it would be productive to “fine-tune” and specifically contextualize the various constructs. A few studies build on the finding that prosocial motivation promotes certain behavior (e.g. Oskamp et al. 1991; Stern et al. 1995), and adopt a more behavioral perspective to test how prosocial motivation is modulated by contextual factors, and thus influences choice behavior. For example, depending on the degree of customer compatibility, prosocial motivation can have a negative impact on innovation adoption, suggesting that a prosocial motivation will not necessarily result in prosocial behavior (Bendell 2017). Also, prosocial attitudes can be tempered by group dynamics, and individuals with a low propensity for prosocial behavior will be more likely to change their behavior if the dominant attitude in the group is for prosocial behavior (Secchi and Bui 2018). While we think that these approaches come closer to our behavioral approach, they often rely on questionnaires that propose hypothetical scenarios or decision outcomes. This means that changing attitudes are reported, rather than actual decisions that affect self-profit levels. Overall, it remains unclear how these intentions, emotions, values, and motivations

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concretely influence decisions. In other words, none of these studies clearly connects the concern for others to social preferences or prosociality. There are some exceptions. The study by Lee et al. (2020) focuses specifically on the dynamics of socially responsible investment decisions aimed at optimizing economic and societal outcomes simultaneously, as opposed to separate investments to generate financial profit and support charities (Lee et al. 2020). This study investigates how individuals manage the simultaneous optimization of financial and social benefit in investing decisions for purely profitable, purely social, and mixed investment options. The authors show that the manipulation of the decision context affects the investment outcomes. Specifically, they find that outcome efficiency or joint optimization of social and financial outcomes is improved by removing explicit social or economic categorical labels. In other words, investment decisions are affected by how the individual receives information. This research opens important avenues for understanding how social preferences are influenced depending on how the decision-maker assesses the value of information (e.g., deliberate vs. more automatic). Overall, the social responsibility and business-ethics literatures show the importance of considering socioeconomic tradeoffs at the individual level. Managers play a key role in determining the relevance of societal value creation for the organization. However, the mere presence of prosocial motivation, emotions, or other individual characteristics neither explains nor predicts whether or not individuals—or innovators or entrepreneurs, for that matter—act prosocially. This gap highlights the need to investigate individual preferences in more detail and examine how individual prosociality is shaped by how information is presented or acquired in organizations. Hybrid Organizations Literature Another very interesting stream of work focuses on hybrid organizations, and how these types of organizations establish, maintain, or reconcile conflicting societal and commercial institutional logics—for example, a development logic aimed at helping the disadvantaged, and a banking logic aimed at generating enough profit to run the business (e.g. Battilana and Dorado 2010; Pache and Santos 2013a; Battilana et al. 2015; Ramus et al. 2018; Hehenberger et al. 2019). This research stream focuses on questions such as: “How can organizational success be defined, taking account of both societal and business factors?”, “How are hiring decisions affected in organizations with both a societal and a commercial institutional logic, and a need to address socioeconomic tradeoffs effectively?” and “What kind of managerial experience is needed to manage these tradeoffs successfully (Smith et al. 2013)?” At the organizational level, it has been shown that hybrid organizations can maintain both logics even when they impose conflicting demands (Pache and Santos 2010; Besharov and Smith 2014). Hybrid organizations are able to manage the different logics they embody by selectively coupling elements prescribed by each logic (Pache and Santos 2013a). The key dimensions of organizational variability are how these logics are instantiated within the organization—for example, the degree of consistency of organizational actions, and the extent to which the logics are

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manifested as core organizational features (Besharov and Smith 2014). Balancing societal and business logics is not straightforward. Mission drift is a welldocumented phenomenon (Besharov and Smith 2014), but can be avoided, for example, through the formalization of processes (Ramus et al. 2017), the development of negotiation spaces (Battilana et al. 2015), and opportunities (such as committees) for individuals to explain their goals in the context of the broader organization (Canales 2013). While we believe that these are important questions, they should also be considered at the individual level in a behavioral context, to gain a more dynamic understanding of how innovators consider and maintain social and economic demands. We believe that the key dimension is individual heterogeneity (similar to organizational variety at the organizational level), which explains how different social preferences are weighted or prioritized within decisions. Do individuals experience something similar to mission drift, which is described as a waning commitment to the organization’s original social mission in an effort to generate revenues (Ramus et al. 2018)? If so, what mechanism is it based on? Another important question in this regard is how individual decisions are influenced by different organizational contexts. This could be contexts that promote, e.g., more deliberate decisions rather than automatic ones, or more exploration than exploitation—but it could also be contextual noise, in the form of inconsistency over social and economic objectives. How are individual decisions influenced by the (in)consistency of organizational decisions? This is important, because we do not know how, or indeed whether, individuals resolve such inconsistencies. In other words, is there an equivalent of the formalization process studied in Ramus et al. (2017) at the individual level? At the individual level, the hybrid organization research has focused on the roles and experience of different stakeholders. For example, in times of turbulence, the roles of internal and external stakeholders differ in relation to influencing innovation strategy; board members and external stakeholders are more influential than administrative leaders, which highlights the delicate balance among different stakeholder pressures (Ramus et al. 2018). The board of directors is considered as being very influential for setting organizational objectives (Goodstein et al. 1994), and the managerial experience among board members affects how they manage divergent objectives (Golden and Zajac 2001; Walls and Hoffman 2013; Ramus et al. 2018). Adherence to logics depends mainly on decision-makers’ prior education and work experience, and can be influenced by organizational socialization (Almandoz 2012; Battilana and Dorado 2010; Lee and Battilana 2013). This suggest that there will be an effect on hiring decisions in organizations with a social mission (Smith et al. 2013): should the focus be on recruiting individuals with a purely social orientation (Battilana et al. 2015), or those who endorse multiple logic sets (Besharov 2014)? Gaining insight into how different stakeholders influence organizations certainly helps us make predictions or suggestions about leaders’ potential choices. However, the implication that a certain experience (say, in business

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activities) will lead—in a way, determine—subsequent choices is a hard one to accept. This is why we believe that the role of experience is, in fact, often ambiguous (March 2010). We suggest that considering concrete choice behavior, as well as social preferences, would provide a much clearer picture of how individuals such as board members decide to manage divergent objectives. Other studies have explored individual factors affecting productive tensions and shaping the response to business and societal logics (Battilana et al. 2015). Adherence to these logics is considered one of the most important influences on how individuals resolve socioeconomic tradeoffs (Besharov and Smith 2014). Those adhering to a particular logic are more likely to support and incorporate that logic in their organizational context (Pache and Santos 2013b; Besharov and Smith 2014). Previous exposure to a prosocial work environment will induce greater adherence to a societal logic, and a greater likelihood of prosocial action. However, adherence to just one logic reduces the ability to deal with tradeoffs involving both societal and economic dimensions (Battilana and Dorado 2010; Pache and Santos 2013b; Besharov and Smith 2014). Individuals who support multiple logics are better able to handle tensions, enact simultaneous contradictory goals, and espouse contradictory values (Besharov 2014). Observing how individuals act underlines the importance of some of their actions in organizational contexts, such as adhering to a particular logic. In these studies, however, we miss the consideration of individual heterogeneity. Do all individuals who place high importance on economic and social goals, who perceive them as mutually reinforcing, have the same level of prosociality? In other words, does a pluralist manager, such as the one described in Besharov (2014), who supports multiple logics and can resolve socioeconomic tradeoffs, always display the same social preferences? Overall, the hybrid organization literature has identified a number of organizational solutions to the problem of conflicting logics. It has also identified the fundamental role played by individual decision-makers. We believe that introducing the kind of behavioral approach we have sketched above might add clarity and observational power to a crucial discussion that has so far based its findings mainly on retrospective accounts of past decisions. To be clear, there is great value in such methods, and this literature has made fundamental contributions. Yet, they might be very productively complemented by the experimental methods typical of behavioral sciences. For example, within the discussion about the importance of board composition, there are mixed results about the extent to which board members’ prior experience (business vs. social) drives their choices. To advance this discussion, we need more precise definitions of experience, since current proxies based on prior occupation or years of work are useful, but still relatively coarse. Similarly, it is unclear how far experience, as derived from occupation in a specific context, may counteract social preferences; or whether social preferences drive one’s choice of which occupational context to join (e.g., corporations vs. NGOs).

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Concluding Remarks Why should we concern ourselves with distinguishing social innovation from innovation, or social innovators from innovators? We began by arguing that the discussion about (social) innovation would benefit from a more precise understanding of the motives that push certain people to undertake activities aimed at addressing social needs. Focusing narrowly on the intended outcomes of social innovation activities overlooks the fact that non-social innovation also has profound social impact. Such an impact might be entirely unintended (as imagined by Mandeville) or mediated by the presence of strong institutions that support competition and curb collusion (as discussed by Smith), yet it is there. Hence, we propose stepping down one level of analysis to look in detail at how people make choices: considering not only their motives, but also their subjective values when making a decision, as well as their social preferences. We have argued that, by doing so, we can not only define innovation and social innovation more precisely, but also develop a more general framework to reconnect two streams of work that have evolved largely independently from each other. In this chapter, we have tried to build a bridge between rapidly evolving streams of work in management (CSR, business ethics, hybrid organizations) that have greatly advanced our understanding of how innovations are introduced at the organizational level, how to organize for innovation, and how to reconcile conflicting objectives. At the same time, we have argued that this work might benefit from being complemented by a more explicitly behavioral approach to social preferences. To this end, we have outlined a simple baseline model that builds on three interconnected elements: choice, socioeconomic tradeoffs, and social preferences. We have argued that, by building these three elements into our analysis of (social) innovation, we can better disentangle the complex interplay of social and economic objectives that inform all decisions. This will help us reunite the discussions about innovation and social innovation, which were once intertwined, but have since grown apart. We would like to conclude by highlighting two possible developments that we find particularly interesting. On the one side, we believe that the discussion about the interplay of experience and social preferences has incredible potential. Why do people make the decisions they do? This is a fundamental question that cuts across several fields of enquiry. By adopting proxies based on years of work in a certain environment, or educational degrees, we discount other factors that shape choices leading people toward certain work environments or educational opportunities, but not others. We just push the problem away, without really solving it. This issue could be behind some of the mixed results we find in the literature on board composition. Recent research in, or inspired by, cognitive sciences could explore the interplay between social preferences (which tend to be stable over long periods, but can be trained (Gloster et al. 2020)), educational and career choices and, finally, decision outcomes to disentangle effects that are currently intractable. We believe this area of enquiry, at the interface between management and cognitive sciences, could deliver vital results.

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Conversely, there is much that the micro and experimental literature we have built upon might learn from management. In particular, what is the aggregation process that leads from individual-level social preferences to some organizational equivalent (e.g. Loch et al. 2013)? Is there such a thing as an “organizational” social preference set in the first place? The discussion on “spaces of negotiation” (e.g. Battilana et al. 2015) or “formalization” (e.g. Ramus et al. 2018) might in fact give us ideas about how individuals, through interactions or the codification of “appropriate” behavior, might help shape organizational preferences that underpin broad strategies.

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Anna Deréky is a lecturer and postdoctoral researcher at ETH Zurich (CH) since 2020. She has obtained her Ph.D. in Technology and Innovation Management from ETH Zurich in 2019. Her research focuses on organizational learning to support innovation and change. She has investigated the role of prosociality and social preferences in socio-economic tradeoff decisions. Before entering academia, she has worked at the European Comission Joint Research Center (BE), that supports European policies with independent scientific evidence and at euforia, an innovative, youth- driven Swiss NGO that empowers people and organizations to embark on their own changemaking journeys. Stefano Brusoni (DPhil, SPRU, U. of Sussex) is Professor of Technology and Innovation Management at ETH Zurich (CH). His research focuses on innovation and technical change, at the interface between strategy and behavioral sciences. He has published on journals such as Strategic Management Journal; Administrative Science Quarterly; Organization Science; Academy of Management Journal; Research Policy and many others. He is Senior Editor of Organization Science. He is also a founder and entrepreneur, currently active in EdTech: https://www.sparkademy.com/

Chapter 5

Leadership in Social Enterprises: A Paradigm for Purpose-Led Organizations John Almandoz and Yih-Teen Lee

Abstract We propose an integral model of leadership for social enterprise that incorporates three conceptually distinct dimensions. First, achieving complex organizational results, which require from leaders an empathetic sensitivity to opportunities, measuring and monitoring social goals, and embodying a paradox mindset; second, motivating and developing people, which involves balancing learning and inclusion; and third, inspiring a transcendent purpose, which requires genuinely committing to the organization’s social purpose, making the positive impact of the organization visible, and fostering transcendent values in the culture of the organization, thus reinforcing its unity. We further elaborate four integrating principles for leaders to effectively connect the three dimensions above: balancing across leadership dimensions, experimenting with win-win strategies, giving primacy to purpose, and establishing mechanisms for the governance of purpose. While this model of leadership is perhaps more relevant to social enterprise organizations, it applies more broadly to all businesses, especially in the current environment where society expects them to fulfill a higher purpose rather than simply making money for their shareholders. By drawing lessons from this integral model of leadership, organizations can contribute more to society’s ability to thrive. Keywords Paradoxes · Integral human development · Transcendence

Introduction Social enterprises, organizations that seek to address societal problems through business ventures, have recently received much attention from businesspeople, business scholars, and civil society more broadly (Volini et al. 2019; Bornstein and Davis 2010; Mair et al. 2006: Borzaga and Defourny 2004). Many find that these institutions with strong social and commercial goals hold immense potential for

J. Almandoz (*) · Y.-T. Lee IESE Business School, Barcelona, Spain e-mail: [email protected]; [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_5

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social innovation, which involves the creation of new products, services, organizational forms and business models that address social or environmental problems more efficiently and effectively (Ramus et al. 2018). Yet, leaders of social enterprises also face business challenges that are often less prevalent in traditional for-profit as well as nonprofit organizations. This raises the question: what model of leadership would be most valuable in those hybrid organizations? There is abundant advice for leadership in the context of traditional business organizations, but the need remains for a comprehensive model of leadership specifically within the context of social enterprises that embraces its multiple and interrelated dimensions. Advice on leadership in the context of social enterprise from scholars in strategy (Smith et al. 2016), social enterprise (Smith et al. 2012), and ethics (Ramus and Vaccaro 2017) often takes partial views of leadership that do not consider all the distinct relevant dimensions considered here. In particular, they often fail to acknowledge the role of leadership in inspiring and motivating people, especially the organization’s employees. While leadership certainly involves calculating, negotiating and incorporating the interests of multiple stakeholders in the organization’s goals, as well as orienting the purpose of the organization towards the real needs of external stakeholders (Freeman 1984), the relationship between leaders and employees deserves especial attention when the subject at hand is leadership, rather than strategy. Our goal is to develop, adapt, and build on traditional ideas about leadership in order to produce a conceptual framework that takes into account the unique challenges facing these institutions and their members. Borrowing from the writings of Juan Antonio Pérez-López (2018) and synthesizing years of literature on leadership, we present a comprehensive model of social enterprise leadership based on attaining sustainable performance in three distinct dimensions. First, structuring the organization to achieve results, i.e., reaching the concrete internal and external goals of the organization; second, attracting and developing people, especially employees, by providing opportunities for learning, personal growth, and inclusion; and third, fulfilling a purpose by making a positive social impact on the organization’s external stakeholders. While originally meant to apply to leaders of any organization, PérezLópez’s dimensions of leadership can be especially helpful when applied to the context of social enterprise. This context may provide insights about leadership more broadly applicable to current business organizations because society increasingly expects business to have a positive social impact.

Leadership: A Brief Review Achieving Results In standard organizations, leadership is first about achieving results. As Peter F. Drucker put it, “Successful leaders make sure that they succeed!” (Karlgaard 2004). Retired General Stanley McChrystal (2013: 392), expressed the same idea in a military context:

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Leaders are not necessarily popular. For soldiers, the choice between popularity and effectiveness is ultimately no choice at all. Soldiers want to win; their survival depends on it. They will accept, and even take pride in, the quirks and shortcomings of a leader if they believe he can produce success.

In traditional business organizations, achieving results begins with a leader’s strategic vision that enables the organization to create and capture value. But, in addition, leaders need to strategically structure roles, incentives, and formal systems within the organization so that people understand clearly what they need to do to reach the desired objectives. Businesses traditionally define those desired results first in terms of economic objectives and view the role of leaders as achieving strategic alignment with those goals throughout the organization. The incentives leaders utilize are primarily extrinsic rewards in exchange for work, such as bonuses, perks, promotions, and other tangible benefits. But an emphasis on results is not characteristic just of leadership in traditional businesses. By definition, leadership in every organization, including nonprofits and social enterprises, involves achieving certain goals in order to remain successful and sustainable. All organizations must at least maintain financial viability and, in addition, meet the other demands facing them.

Developing People The first dimension of leadership—results—would seem to fall under the label of management in the categorical opposition that some scholars have set between management and leadership, because the first is usually technical and task-oriented, and unrelated to people (Zaleznik 1977). Leadership, by contrast, would involve the second dimension: connecting with and developing people, and providing a meaningful vision that orients the organization’s future activities (Kotter 1990). This conceptual distinction between management and leadership is similar to that which contingency or situational models of leadership (Fiedler 1964: Hersey and Blanchard 1969) have made between task and relationship leadership styles. A task orientation refers to accomplishing the task to obtain desired results, while a relationship orientation refers to building deeper interpersonal relationships with people. Fiedler (1964) proposed that a leader’s optimal orientation towards relationships vs. tasks depends on attributes of the situation, including the ambiguity of the task, the power of the leader, and the level of trust and loyalty that the group has in its leader. For Hersey and Blanchard (1969), the preferred leadership styles—ranging from directive style to full delegation—depend primarily on the level of the cognitive and motivational maturity of subordinates. Leadership thus involves more than obtaining results or reaching certain goals. Leadership is also about building relationships, and about challenging, and inspiring people, which is often necessary to achieving the desired results in the long term. As Jack Welch put it, “Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others” (Welch and Welch 2005). Focusing only on the mechanistic functions of the organization itself, and not

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on the individuals led, can be very detrimental, especially in organizations that need talented people at all levels, interacting with customers, learning, and adapting to constantly changing requirements. This dimension of leadership can result in organizational learning and a healthy organizational climate. While focusing on this dimension, the incentives leaders provide for employees are intrinsic (Ryan and Deci 2000; Pink 2011), such as learning, personal development, satisfaction, and personal self-realization. The mechanisms they employ are more informal than formal and are based on trust and empowerment.

Achieving a Positive Impact on Others But perhaps the most abstract, but increasingly emphasized, aspect of leadership is that of the positive impact that the organization makes on others, or what is commonly referred to as “purpose.” The distinction of purpose with respect to the first two dimensions is that this positive impact focuses on others outside of the organization, not organizational results or the intrinsic needs of employees. In Barnard’s (1968)‘s classic The Functions of the Executive, the author emphasizes that the role of the leader is to create a common awareness of and belief in the organization’s purpose. Selznick (1957) echoes the same idea by asserting that leaders define a purpose for the organization and build it into the social structure of the enterprise, transforming a neutral body of men and women into a committed polity. Paul Polman, former CEO of Unilever made that idea central to his leadership: “All companies should strive to have a clear long-term purpose built into their business strategy and bring it to life through their brands and products” (Polman and Bhattacharya 2016). At the root of this dimension of leadership is the realization that people have an other-centered need for transcendence and meaning. People are motivated not only to satisfy their own extrinsic and intrinsic needs but also to do something for others. Increasingly, society expects companies to do more than just generate profits for shareholders. Even large investors have embraced the cause of purpose. Larry Fink, the CEO of Blackrock wrote a public letter to CEOs stating that “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society” (Fink 2018). Leadership scholars have captured this other-centered dimension of leadership, among other ways, through the notion of servant leadership, which involves placing service ahead of personal interest. As the founder of this leadership philosophy, Robert Greenleaf, puts it: The servant-leader is servant first... the difference manifests itself in the care taken by the servant—first to make sure that other people’s highest priority needs are being served... do those served grow as persons? Do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants? And what is the effect on the least privileged in society; will they benefit or, at least, not be further deprived? (Greenleaf 1977: 13–14; Quoted from Lemoine et al. 2019).

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Table 5.1 Key components of leadership Leadership dimensions Leadership locus of attention Motivational drivers Focal dimension of work

Achieving results The organization

Developing people Employees

Having a positive impact on others Social impact on beneficiaries

Extrinsic

Intrinsic

Transcendent

Objective: Products and services rendered

Subjective: Internal impact on workers

Transcendent: Impact on the beneficiaries of work

This perspective of leadership focuses first on the real needs of the persons served as ends in themselves, and not simply as means to reaching organizational goals, or to satisfying self-centered extrinsic or intrinsic motivations of leaders or employees. The emphasis on the highest priority needs or on their growth as persons focuses organizations on integral human development, open to the promotion of the common good and the broader interests of society (Melé 2015; Melé and Castella 2010). Each of these aspects of leadership in traditional organizations is crucial not only because they pertain to a different aspect of business but also because they rest on three distinct aspects of human work and the distinct motivational drivers of employees. First, work has an objective dimension, which involves the actual products and services rendered. The economic value created by those outputs can in part compensate employees financially, satisfying their extrinsic motivation. Second, work has a subjective dimension (John Paul II 1981), which is the internal impact that work has on the people performing it. This internal dimension of work may drive intrinsic motivation, derived from such sources as autonomy, mastery, learning, and enjoyment. Finally, work has a transcendent dimension, addressing the hopefully positive impact it has on the beneficiaries of the work performed. This transcendent dimension can satisfy the employees’ transcendent motivation. We will use a three-dimensional framework of leadership and motivation as the starting point for a model of leadership in social enterprises. In the next section we discuss the leadership dimensions of Table 5.1 specifically in the context of social enterprise. This same table, with small variations, would serve well as a starting point for a tridimensional model of leadership in social enterprises.

A Three-Dimensional Model of Leadership for Social Enterprises Dimension One: Achieving Economic and Social Results Achieving concrete results in social enterprises, the same as in traditional businesses, requires a keen perception of opportunity and potential. But unlike leaders in traditional businesses that base their leadership decisions on perceived potential

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for financial success, those in social enterprises have a more ambiguous relationship to the bottom line (Smith et al. 2013; Battilana and Lee 2014). When commercial goals and social missions are equally important, where and how should leaders look for opportunities? Empathetically Sensing Opportunities Many leaders of successful social enterprises look differently at opportunities and discover other resources an organization can obtain through its social mission, including philanthropic and governmental support. They achieve results by honing their perception of opportunity, by seeing potential in unexpected places. Their vision is connected to an empathetic sensitivity to real social needs and the confidence to find innovative ways to meet them (Mair and Noboa 2006). Some of the most successful social enterprises have found opportunities in communities at the “bottom of the pyramid,” which are risky territories for new businesses. Those opportunities come with a whole host of undesirable obstacles: low funding, bad infrastructure, different consumer behavior and expectations, inadequate technology, and so on (Simanis and Duke 2014). Yet, precisely because they include millions of insufficiently served people, they can support very profitable endeavors. Being attuned to the needs of economically underdeveloped communities allows social enterprise leaders to see opportunities to achieve positive results—economic and social—where traditional business leaders may just see liabilities. Christensen and colleagues illustrate this empathetic ability to detect hidden opportunities through the story of Celtel, a very successful telecommunications social enterprise founded on a vision inspired first and foremost by the potential for doing good (Christensen et al. 2019). It became very profitable, but it required a different set of lenses to detect the opportunity. Mo Ibrahim founded Celtel in 1998 to improve the quality of life for impoverished African communities by providing them with access to mobile phones. While others may have seen poverty as an insurmountable obstacle to profitably selling devices that were—at the time—too expensive for the masses, Ibrahim saw an opportunity to cultivate demand where none had previously existed. Although cellular phones were luxuries of the wealthy and privileged in the late 1990s, Ibrahim saw their potential to create value by bridging geographical gaps through telecommunications, which could save people time and money and have positive ripple effects throughout society. Ibrahim’s vision paid off, socially and economically. Profit was not the main inspiration for his enterprise, but it was the result. Celtel expanded, building operations in 13 African countries. Revenues soared. In 2006, about a year after Ibrahim sold the company for over $3 billion, Celtel’s customers accounted for almost one-third of Africa’s population. By seeing underdevelopment as a motivation rather than a deterrent, Ibrahim had created a market where once there was none. He was able to improve life for Africans living in poverty and deliver remarkably impressive business results at the same time. This story illustrates research by Adam Grant and colleagues (Grant and Berry 2011), which showed how “the necessity of others” could become “the mother of invention” by inspiring perspective-taking and creativity, potentially showing paths to profitability ignored by others.

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Measuring and Monitoring Social Goals One difficulty that social enterprise leaders face is measuring success in social performance. Defining goals clearly is essential for managers since those goals are key to establishing and communicating priorities as well as assessing organizational performance (Locke et al. 1981). Leaders in traditional businesses are already familiar with the role of “objective” metrics that function as helpful key performance indicators (KPIs). Identifying metrics for evaluating social impact is just as essential for sustainable social enterprises, but social impact can be more ambiguous and difficult to measure (Sawhill and Williamson 2001), even though significant progress has been made on that front (Ebrahim 2019). Traditional KPIs are less useful in this dimension and there is no one-size-fits-all, predefined set of social KPIs to be adopted. Instead, research suggests that different types of KPIs suit different types of social enterprises (Santos et al. 2015). Social enterprises’ needs differ based on how aligned the social and commercial operations are within the organization, so social enterprise leaders should assess the relationship between their organization’s social and commercial operations and determine specific KPIs and their relative importance accordingly. Julie Battilana and colleagues have found that “companies succeed by dedicating substantial time and effort to developing a manageable number of trackable metrics during the goal-setting process and revisiting them regularly to assess their continuing relevance and adequacy” (Battilana et al. 2017). Their research also suggests that good social impact KPIs can look different in different organizations. While for one organization, straightforward social KPIs that simply track the number of the organization’s beneficiaries can be helpful, these metrics may not provide helpful data for others. Dimagi, a social enterprise providing software for frontline healthcare workers in developing countries, experimented with a variety of KPIs and solicited advice from other social enterprise leaders. At first, it used the “number of active users” to measure the organization’s social impact (Battilana et al. 2017). The firm’s leader later realized that this metric failed to capture the organization’s actual impact, and eventually combined it with an “impact review team” dedicated to analyzing qualitative aspects of the company’s success alongside the more straightforward quantitative data. The key lesson for social enterprise leaders is to approach the development of social impact KPIs with a learning mindset—that is, being willing to experiment and adapt based on experience. Battilana and colleagues suggest that these leaders’ learning mindsets were key in helping them understand the social needs they served and the best way to measure success in doing so. Balancing Goals through a Paradox Mindset The ability to identify and balance distinct goals is also key for social enterprise leaders. Leaders of hybrid organizations combining social and business goals need to develop a vision of what the desired results are and to design and build a structure to periodically measure and monitor the activities that lead to attaining social and economic goals, to discuss, understand, and negotiate their tradeoffs, and to resolve related tensions and conflicts (Battilana et al. 2017). The goals of effecting positive social change and earning a profit are often considered contradictory but knowing how to accept and take advantage of this tension—rather than avoiding or eliminating it—is essential

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when leading a social enterprise (Smith et al. 2012). Tensions in organizations, like competing priorities and seemingly inconsistent goals, can inhibit job performance, lead to conflict, paralysis, mission drift, and ultimately contribute to a company’s failure (Smith and Berg 1986; Vince and Broussine 1996). However, they also have the potential to strengthen an organization, improve performance, and foster innovation. Some research shows that a leader’s approach to these tensions can have a substantial influence on whether their effect is positive or negative (Miron-Spektor et al. 2018; Ramus and Vaccaro 2017; Ebrahim et al. 2014). Social enterprise leaders face tensions in almost every aspect of their organization and adopting a paradox mindset can help them to use these tensions to their advantage. A paradox mindset involves conceptualizing tensions as unavoidable, acceptable, and even potentially beneficial for the organization (Smith et al. 2012). It requires innovative thinking that calls assumptions into question and takes new and counterintuitive approaches seriously. This competency may also be described as a “both/ and” leadership mindset (Smith et al. 2016). A “both/and” mindset allows leaders to reframe “either/or” choices as “both/and” possibilities, seeing conflicting requirements or missions in a “dynamic equilibrium” rather than as a state of affairs demanding a “stable resolution.” While this mindset could be beneficial for leaders in any organization, it is especially helpful in social enterprises, where tensions between goals are particularly prevalent. A paradox mindset can be helpful in the acquisition of scarce resources. Research shows that resource scarcity tends to exacerbate the negative effects that tensions have on the performance of a business (Miron-Spektor et al. 2018; Almandoz 2012). Social enterprises may accentuate the negative effects of resource scarcity because of their dual missions. The “commercial side” of the business may require more of the budget at a given point in time than the “social mission side,” which can exacerbate the internal tensions inherent in social enterprises. Leaders need to be innovative in responding to these tensions so as to minimize their negative effects, and they must allocate resources carefully to make sure that they attend to both business and social goals. Rather than thinking of resources as “limited,” social enterprise leaders adopting a paradoxical, “both/and” mindset perceive resources as abundant and generative. “People with this value-creating mindset pursue strategies to grow the pie, such as exploring collaborations with new partners, using alternative technologies, or adopting more-flexible time frames for shifting resources for better use” (Smith et al. 2016, p. 5). Leaders at Grameen Veolia Water exemplified this mindset when business and social goals were in tension (Battilana et al. 2017). The organization aimed to offer safe and affordable water to poor rural villagers while remaining financially selfsupporting from existing sales—not relying on grants. However, at the price at which they sold water the company was not self-supporting. Leaders decided to address this issue by branching out into a new, more profitable market segment and selling jars of water to urban schools and businesses. Their sales in urban areas provided enough revenue to help Grameen Veolia Water continue providing safe, affordable drinking water to rural villages that needed it. In other words, by exercising a both/and mindset, they did not drift from their original goals.

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A credible commitment to an ambitious social goal, even if it is expensive, may be essential to motivating and engaging multiple stakeholders, including wealthy investors and donors in a position to provide critical financial resources. Paradoxically, the best way to acquire scarce resources may be to embark on an even larger and more ambitious project. Clive Gillinson, the highly successful executive and artistic director of Carnegie Hall, has put it elegantly and succinctly: “Money follows vision, not the other way around” (Jepson 2007). But to the extent that resource providers are motivated by both financial and non-financial goals, leaders need to establish credibility with both of these groups, and thus must clearly document and demonstrate their success at multiple goals (Ramus and Vaccaro 2017). Table 5.2 expands Table 5.1 by refining the leadership dimensions in the first row and including two rows dealing with social enterprise specifically.NOTE: I think we do not need the blue lines at the level of "Levers of leadership within social enterprises"

Dimension Two: Motivating and Developing People But successful leadership is not exclusively about reaching ambitious results. Investing in the selection and development of organizational members is increasingly important for managers (Charan et al. 2018). Leaders can reinforce the culture of social enterprises by attracting people with the appropriate expertise and values. To the extent employees identify more fully with the business than the social mission, or vice versa, leaders may need to ensure that there is at least a minimum level of alignment with both missions to mitigate future conflicts, which are to be expected (Glynn 2000). Attracting and maintaining uniquely skilled, high-quality talent with shared values may be essential to meeting the unique challenges facing social enterprises, and leaders can tap into employees’ intrinsic motivation (Ryan and Deci 2000) to do this. Leaders in social enterprise can create the conditions that provide employees with intrinsic motivation in the form of interesting, meaningful work, opportunities for learning and growth, and a dynamic work environment that fosters innovation and cooperation. If innovation is at the core of the social enterprise, that could add to the intrinsic motivation of employees. For example, a senior employee of an innovative green bank, which fostered sustainability in addition to being a community bank, expressed his intellectual curiosity for exploring a different business model: “I was psychologically, intellectually moving into the idea that there needs to be something more than the standard community bank model. This offered me an opportunity to really think through what it means to be a green bank” (Marquis and Almandoz 2012). When different forms of expertise and intrinsic motivations blend in an organization, leaders must be prepared to create an inclusive environment that is conducive to all of those motivations.

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Table 5.2 Key components of leadership in social enterprise Leadership dimensions Leadership locus of attention Motivational drivers Focal dimension of work

Achieving economic and social results The organization

Motivating and developing people Employees

Extrinsic

Intrinsic

Transcendent

Objective: Products and services rendered

Transcendent: Impact on beneficiaries of work

Adaptation to the context of social enterprise Levers of leadership within social enterprises

Desired organizational goals are complex: Not only economic but also social Empathetically sensing opportunities

Subjective: Internal impact on workers Balance of expertise and inclusion Tapping into the inner work lives of employees Applying meaningful work design Enabling excellence at work and inclusion Respecting the dignity of all employees

Committing genuinely to the social mission

Measuring and monitoring social goals Balancing goals through a paradox mindset

Having a positive impact on others Social impact on beneficiaries

The primary motivational driver in the organization is its transcendent purpose

Making the impact visible

Communicating cultural values to employees Shaping a sense of unity around the purpose

Tapping into the Inner Work Lives of Employees People like to be associated with innovation and positive social impacts, which creates an opportunity for social enterprises. Such a work context tends to encourage employees to be motivated, engaged, and passionate (Grant and Berry 2011). Social enterprises, which prioritize social mission and focus on innovative ways to deal with social problems, may thus be particularly equipped to cultivate committed, highly motivated talent, perhaps more so than traditional business organizations. One powerful way for social enterprise leaders to encourage employees to be more engaged is to enrich their inner work lives. The concept of inner work life, developed by Teresa Amabile and Steven Kramer, refers to workers’ internal perceptions, feelings, and motivations related to their work. Amabile and Kramer studied the impact of inner work life through the diaries of employees in creative teams for more than a decade. Their findings suggest that the impact was significant. They discovered that “people are more creative and productive when their inner work lives are positive—when they feel happy, are intrinsically motivated by the work itself, and have positive perceptions of their colleagues and the organization” (Amabile and Kramer 2011). In other words, a positive inner work life not only makes workers happy, but it makes them more productive as well.

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How can social enterprise leaders cultivate rich, positive inner work lives in their employees? According to Amabile and Kramer (2011), “of all the things that can boost emotions, motivation, and perceptions during a workday, the single most important is making progress in meaningful work.” They call this idea the progress principle. According to the progress principle, employees who feel that they are actively advancing towards a goal, making worthwhile contributions at work, and being acknowledged and appreciated for doing so have the greatest capacity for good, creative work. The context of their study was traditional businesses, but social enterprise leaders may have an even greater opportunity to enrich the inner work lives of their employees, which may be important if, as is often the case, they cannot offer a comparable level of compensation or career mobility as for-profit organizations. Leaders can cultivate this kind of inner work life by giving employees longand short-term goals so that there are plenty of opportunities to acknowledge progress and positive contributions, and by removing impediments to progress, for example those arising from politics and conflicting goals. All of these measures can contribute to a positive inner work life for employees, and thus, a happier, more committed team. Applying Meaningful Work Design In addition to focusing on recognizing employees and supplying a set of goals and targets, leaders can also foster organizational conditions that facilitate a high level of engagement. Longstanding research on work design (Hackman and Oldham 1976) shows that the ideal job characteristics include an appropriate level of autonomy for organizational members, and sufficient opportunities to develop and use a variety of their skills through appropriate and challenging assignments, well-defined tasks, and work that matters to them. An optimal work design includes an appropriate level of feedback so that employees know how well they are doing and can take ownership of their work results. Designing jobs with these characteristics is associated with higher levels of psychological meaningfulness, responsibility for outcomes, and knowledge of results, which in turn leads to higher internal self-motivation, job satisfaction, and worker performance. Social enterprise work may almost guarantee some of these job characteristics, such as perceived meaningfulness from doing work that really matters. But others, like allowing people to use a variety of skills or exercising more autonomy and discretion, may require more attention, especially in jobs where those job characteristics could be critical intrinsic motivational supplements. In addition, those job characteristics can also give employees room to innovate and increase the probability of reaching creative breakthroughs for the company. Enabling Excellence at Work and Inclusion Social enterprise leaders can also focus on intrinsic motivation by enabling the conditions to do “good work” in the sense of aspiring to excellence: “[t]he worker knows his stuff, is highly skilled, and keeps up with the latest knowledge and techniques” (Gardner 2010: 5). Some social enterprises adopt an “employment model” (Alter 2007; Besharov et al. 2019) by focusing their mission on providing work to individuals who would have a hard time finding it on their own. Work itself is therapeutic as it makes people feel useful and meets basic human needs, including a sense of belonging, esteem and self-

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actualization, especially when it involves “good work” (Maslow 1943). One example of a social enterprise following the employment model and focusing on good work is La Fageda, created by Cristobal Colón,1 to employ mentally handicapped people, in some cases suffering from schizophrenia and other challenging mental diseases (Tremlett 2016). The organization’s focus has changed over time. At first, employees worked on cleaning and gardening, then they ran dairy farms; now they produce yogurt (Ribera 2006). Cristobal Colón did not create La Fageda to produce anything in particular but to give employment to people excluded from the labor market because of their physical and mental infirmities. But unlike other charitable institutions that often create unproductive, make-work jobs simply to keep workers busy, La Fageda aims at producing a high-quality, award-winning yogurt, thus allowing employees to take pride in their high standards of excellence. This provides employees with a strong sense of fulfillment and meaning at work (Ribera 2006). La Fageda exemplifies a way for social enterprises to develop people and imbue even their simplest work with meaning. “If we must be manufacturers of something, Colón says, call us meaning producers” (Ribera 2006). La Fageda also exemplifies a particular, innovative opportunity for social enterprise leaders when it comes to inspiring meaning. It is not always necessary to assign workers tasks directly contributing to “doing good” in a charitable project. Any work well done has an intrinsic dignity, which is a worthy goal for a social enterprise. A yogurt company does not seem as obvious a choice for a social enterprise as a micro-finance firm, or another organization that has a more direct social impact. La Fageda and other organizations that adhere to the “employment model” of social enterprises (Besharov et al. 2019) show an alternative path to social goals by providing goods and services that may not be socially revolutionary, but which have a positive social impact by fostering meaningful work among employees who might otherwise have a hard time finding jobs. Respecting the Dignity of all Employees La Fageda also illustrates how the focus of a social mission can be the employees themselves. The company serves their needs as much as those of customers. But interestingly, La Fageda employees are not treated as “disabled” people, but as valued workers with unique competencies and needs, even as they receive various forms of assistance (Ribera 2006). As Colón remarks when asked about it, his employees have a “certificate of disability,” which “ordinary” mentally fit people do not have—although they can qualify for one, if needed, as they advance in age (Tremlett 2016). La Fageda does not emphasize the handicap of employees in their marketing campaigns. By not basking in the company’s social mission, La Fageda certainly misses opportunities to earn goodwill, but, as Colón explains, people do not buy La Fageda yogurt because mentally handicapped people make it. They buy it because the quality of the product is very good (Ribera 2006). But the main reason why they do not advertise the infirmities of their employees to earn sympathy is that it would undermine the organization’s 1

No relation to Christopher Columbus (in Spanish Cristobal Colon), who arrived in the New World in 1492.

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inclusive philosophy, which focuses on people’s strengths rather than their weaknesses. Good work more than social sympathy is what has led to La Fageda’s flourishing. In the end, treating employees as mature workers becomes a selffulfilling prophecy. Another example of an “employment model” social enterprise is Faire Collection, which hires marginalized, impoverished artisans from around the world to produce fair-trade jewelry. This offers the artisans potential avenues out of poverty as well as the opportunity to sell their work globally. As with La Fageda, Faire Collection’s real social impact does not lie in providing customers with jewelry, but rather in hiring marginalized employees to produce it. Also like La Fageda, Faire Collection not only assists these employees by hiring them to do dignified work, but also by investing in their individual talent and well-being. It pays fair wages, with some of their employees earning 12 times more than they earned as independent artists selling locally. It develops their talent, providing mentors and training programs in such business skills as accounting, financial management, and computer literacy. It provides academic scholarships for their artisans and their families, as well as no-interest loans to support them in developing their own businesses (Shopfaire 2019). Clearly, social enterprises like La Fageda and Faire Collection epitomize what it means for leaders to invest in their employees not just as means to an end, but as ends in themselves. Operating according to the employment model gives those organizations special opportunities when it comes to developing talent, but all social enterprise leaders—no matter their company’s business model—can learn a lesson from La Fageda and Faire Collection’s investment in their workers. All social enterprise leaders can seek to offer workers a rich inner work life and a platform for learning and growth, seizing the unique opportunities afforded by their own business models to pursue such goals. In cases where social enterprises cannot afford the high salaries of for-profit organizations, these intrinsic benefits could be an excellent motivational supplement (Ryan and Deci 2000; Pink 2011). Because of the attractiveness of the work environment, the benefits are likely to outweigh the costs, even if by building their capabilities in some cases some employees may outgrow their organization.

Dimension Three: Having a Positive Impact on Others Achieving results and investing in talent are key pillars of good leadership in any organization, and while both may be important levers for social enterprise leaders, perhaps the most uniquely important aspect of social enterprise leadership is inspiring a sense of purpose transcending the organization. Serving a purpose often plays a more prominent role in social enterprises than in traditional businesses. While traditional businesses may identify some lofty purpose in its mission statement, marketing, and internal rhetoric, often the social purpose they seek to fulfill is vague and abstract, and usually secondary to the concrete KPIs by which they measure financial success. Purpose is usually the means to an end in traditional for-profit

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organizations (Mayer 2018). By contrast, in social enterprises, the inverse is more likely the case. Social purpose is more often the driving factor of the organization, with material and financial success placed at the service of some good greater than the organization itself (Battilana et al. 2017). Committing Genuinely to the Social Mission Commitment to the social mission and the organization’s beneficiaries is likely to be an important dimension of leadership in social enterprises. Leaders often feel called to devote themselves to their mission and influence other organizational members through their example (Wrzesniewski et al. 1997). The social mission in social enterprises is often more than a superficial aspect of branding meant to create an attractive environment for employees, or for customers who increasingly demand social responsibility. The mission is larger than the particular KPIs, which the organization may need to achieve with a view to securing future organizational resources. A genuine commitment to the social mission may show in a learning mindset as the organization aims to research and explore the real needs of the people it sets out to help, or in the willingness to talk to its stakeholders or to experiment with alternative ways of setting and monitoring organizational goals (Battilana et al. 2017). Genuine commitment is the opposite of impression management or window dressing or inflating the results of the company to demonstrate a social impact (Schlenker 1980). To the extent that the organization is committed to its social mission, and not simply to showing success in meeting its goals, it will constantly strive to address new needs and problems (Selznick 1957). To really remain committed to serving a social purpose rather than just using it as a means to a commercial end, social enterprise leaders need to acknowledge that purpose is not invariably good for the bottom line (Margolis and Elfenbein 2008; Margolis and Walsh 2001). It certainly can be, since multiple paths may connect purpose and profitability (Porter and Kramer 2019); however, if this is the main expectation of social enterprise leaders, they may often be disappointed. Research attempting to establish a causal link between social and business performance has been inconclusive (Margolis and Walsh 2001). And even in studies that show a positive relationship between these two variables, the direction of causality between doing good and doing well is far from obvious. A social enterprise may need to reconcile itself to the notion that doing good is its own reward. When doing good is instrumentalized for the sake of higher profits, it may lead to destructive tensions, including attributions of hypocrisy or greenwashing when tradeoffs are encountered (Laufer 2003), especially when doing good may turn out to be expensive (Crane et al. 2014). However, when leaders’ commitment to a social purpose is genuine and not just a means to greater profitability, when they see their work as a “labor of love,” they may tap into a powerful and enduring motivational driver for themselves and for others in the organization, which may more than compensate for the cost entailed in “doing good.” And when that is not the case, the net cost of the social strategy will test the extent of the company’s social commitment. Making the Impact Visible To the extent that employees have a strong sense of transcendent motivation—their desire to do something meaningful to help others

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(Pérez-López 2018)—leaders can leverage it for the benefit of the organization and its customers. But leaders can also create the conditions for such transcendent motivation to grow and thus make an even greater impact on beneficiaries. One way to do this is to make the impact of the organization’s work, including the good it provides to beneficiaries, more visible to its employees and other members of the organization. Research by Adam Grant and colleagues (Grant et al. 2007) has demonstrated that employees who see the meaningful, positive impact their work has on others are happier and more productive. They studied a group of employees at a university call center tasked with soliciting donations via phone calls (work that is often poorly paid and not intrinsically motivating). How could the organization motivate these workers? In this experiment, they introduced the call center employees to the recipients of scholarship funds the employees had solicited. The interaction lasted just 5 minutes, but the result of that brief interaction was a significant increase in morale and productivity (an almost three-fold increase in the amount of money raised) among call center workers. Additionally, Grant has found a measurable positive impact of transcendent motivation in other research settings (Grant 2008, 2013). Leaders of social enterprises, which are often organizations with admirable social missions to which many employees may already be drawn, have an opportunity to use those missions as a motivational lever to achieve greater social impact. But doing so effectively may not be easy. As Grant has shown in other research, leaders are not likely to be as effective in communicating transcendent or prosocial motivation to their employees as the beneficiaries themselves (Grant 2011; Grant and Hofmann 2011). Thus, leaders can “outsource” inspiration by creating opportunities for employees and happy customers to interact. Bill George, former CEO of Medtronics, a medical device company, outsourced inspiration in this way by inviting patients and doctors to the annual holiday party so that all employees had a chance to feel firsthand the impact their work had on real people. Communicating Cultural Values to Employees Leaders can also foster a collective sense of purpose and commitment to the social mission by communicating appropriate cultural values among employees through hiring decisions, and through training, socializing and reward practices (Chatman and Cha 2003). Organizational culture is “the collective programming of the mind” among employees (Hofstede 1984). It is a pattern of “basic assumptions” (Schein 1985a), of the beliefs, values, and meanings (Davis 1984) shared by members of an organization that lead them to think and act in particular ways. Such a pattern “has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel” (Schein 1985b). Leaders can use rites, stories, symbols, rewards, and ceremonies to reinforce the appropriate values and behaviors and to inspire a commitment to the organization and its social mission (Sun 2008). Formal approaches to socialization may include company-wide events such as annual general assemblies and retreats where social goals and values are explained, discussed, assessed, and put into perspective, and where tensions between socialvalue-creating and revenue-generating activities can be explored. Job-shadowing

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programs and other forms of experiential training can also purposefully bring different groups together so that different aspects of the mission can be integrated. Wegmans, a company well known for its distinctive identity and commitment to its values, does this through leadership training. They offer Leadership Values Assessment (LVA) sessions to employees, where leaders explore the personal values of people at a given moment to generate an individual action plan with a coach, and then evaluate their progress at achieving it months later. What makes this program unique, Almandoz and colleagues explain, is “its strong focus on disseminating the company’s values” (Almandoz et al. 2018). Shaping a Sense of Unity around the Purpose One of the benefits from having a shared purpose is that it often has the effect of unifying the organization’s various stakeholders towards achieving that common purpose. To the extent that social enterprises are hybrid organizations with multiple ends (Battilana and Lee 2014), they are likely to include individuals and divisions with different identities, backgrounds and ideals, differently shaped by business and social missions, (Battilana and Dorado 2010). It is therefore likely, or at least possible, that conflict and politics between the different groups will arise (Glynn 2000). By driving commitment to a shared purpose, social enterprise leaders can cultivate a sense of unity within their organization, and avoid it becoming a segmented network of “silos.” The joint mission can be the “superordinate goal” that reduces intergroup conflict (Sherif 1958), which may otherwise spontaneously arise from social identity categorizations (Tajfel and Turner 1979). As part of their meaning-making role (Podolny et al. 2004), social enterprise leaders may need to become experts at establishing linkages between the overall mission of the organization and the subordinate missions of its different internal units and external stakeholders (Cardona and Rey 2006). This alignment of subordinate missions can be a very powerful way to achieve unity in the organization and increase social impact. The motivational impact of unity was evident in research on a green bank with a strong social mission (Marquis and Almandoz 2012). A bank employee reflected on the impact of shared beliefs and values among different stakeholders throughout the organization, even in times of uncertainty: I honestly feel that when you get board members, and shareholders and customers with fundamentally similar beliefs [from those of people in the organization] about the way things are to happen, it is hugely powerful. You could feel it. We are coming out of that terrible economy [in 2008], and we are not quite achieving profitability, so that brings out a bit of extra angst, but even with all that you can still feel the power. (Marquis and Almandoz 2012: 7).

The salutary effects of unity are also evident in the research of Julie Battilana and Silvia Dorado who show the results of different hiring strategies and socialization practices in novel microfinance organizations. They found that hiring individuals without work experience, who are thus more malleable and more likely to fit in well, produced better results than hiring experts steeped in the logic of banking or development; the experience and mindset of the latter tended to heighten tension and conflict at the organizational level. They found that focusing on unity by taking a

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“tabula rasa” approach produced better results because it facilitated the achievement of a balance of competing logics (Battilana and Dorado 2010).

Integrating Principles Our three-dimensional model of leadership for social enterprises suggests that leaders need to simultaneously engage in actions pertaining to results, people, and purpose. To facilitate the ability of leaders in social enterprises to effectively implement this model, we propose four integrating principles: balancing across leadership dimensions, experimenting with win-win strategies, giving primacy to purpose, and establishing governance mechanisms to achieve purpose. This integral model of leadership for social enterprises is presented in Fig. 5.1.

Balancing Across Leadership Dimensions This perspective of leadership highlights the notion of balancing, not only between business and social goals, as already discussed in the section on results, but also

Fig. 5.1 An integral model of leadership in social enterprise

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across the three leadership performance dimensions: results, people, and purpose. An exclusive focus on one of the three dimensions could be myopic as it may negatively affect the sustainability of the social enterprise. In balancing the three dimensions, leaders may need to interact regularly with their multiple stakeholders to better understand how they relate to the purpose of the organization, what results they expect, and which people the organization needs to attract in order to obtain those results. Recent research has found that forming partnerships with actors in relevant sectors, for example “nonprofit organizations, social enterprises, volunteers, public bodies, and social services” (Ramus and Vaccaro 2017: 313), can help social enterprises stay true to their hybrid purpose. Engaging these stakeholders can help organizations reap the benefits of their positive input, including their expertise, perspectives, resources, and connections. Leaders can do this by asking stakeholders for advice on the purpose, structure, and execution of projects. They can also present the results of their social projects to stakeholders so they can evaluate the extent to which they actually met the social needs they were designed to address (Ramus and Vaccaro 2017). Consistently pursuing this kind of engagement can help social enterprise leaders focus on their objectives and avoid mission drift in achieving business and social goals (Ebrahim et al. 2014).

Experimenting with Win-Win Strategies Social enterprise leaders could also aspire to find win-win solutions that allow them to derive synergies from the varied interests of stakeholders, although this can involve difficult trade-offs. Leaders might explicitly look for strategies that have a positive influence simultaneously on results, people, and purpose. While we have distinguished these three categories of leadership performance, it is evident that the categories overlap. For example, a meaningful sense of purpose is likely to have intrinsic benefits, as employees are likely to enjoy and grow as individuals by making a positive impact on others. This link between social purpose and people’s intrinsic motivation is not new to organizations attempting to recruit millennials— who are often attracted to organizations making a positive impact on society (Deloitte 2016). Similarly, fostering the conditions for motivating and developing people and for having a positive impact on others could make employees more productive, as in the example of the call center cited above, thus leading to improved organizational results. So, while these three dimensions of leadership are conceptually distinct, they can be integrated. A paradox mindset may help leaders to accept and take full advantage of the tensions among the referenced three dimensions of leadership and, more generally, among their multiple goals (Smith et al. 2012), fostering innovative thinking that aims at win-win solutions. A “both/and” leadership perspective (Smith et al. 2016) may allow leaders to see conflicting demands in a “dynamic equilibrium” in which results, people, and purpose end up in a better place in the long term. The story of Grameen Veolia Water previously mentioned

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illustrates this win-win approach: the organization expanded the business side in urban areas to subsidize the provision of safe, affordable drinking water to rural villages that needed it. Thus, results in the achievement of both business and social goals improved, which tended to reinforce the intrinsic motivation and transcendent purpose of employees.

Giving Primacy to Purpose But even while all the dimensions of leadership matter, the purpose dimension in social enterprises is more at the core of such organizations, compared to regular businesses. Having purpose at the core is likely to have some positive effects for the organization. As mentioned above, the organization’s transcendent commitment to the social mission is likely to reinforce the intrinsic motivation of employees, and both together are likely to influence favorably the ability of the organization to reach its social goals. Whether success in reaching social goals has a positive influence on the organization’s business goals is uncertain (Crane et al. 2014). Success in making a positive impact, however, is likely to improve the ability of the organization to attain needed resources from donors, communities and governments. If purpose is paramount, the organization is more likely to set ambitious targets and achieve maximum impact than to low-ball objectives to achieve its stated KPIs because addressing the real needs of beneficiaries matters more than perceived success in reaching specific targets. Giving primacy to purpose is thus likely to be beneficial for the broader society. This primacy can also constitute a superordinate goal enhancing conflict resolution and collaboration within the organization, but also among the various stakeholders, and possibly even with potential competitors. This is not to say that making purpose primary is an easy goal. Translating a broad purpose into concrete decisions could involve a great deal of ambiguity and disagreement. Take for example, the case of a green bank (one promoting environmental sustainability) exploring whether or not to make a loan to a gas station for the installation of solar panels. Installing solar panels would contribute to the social and business objectives of the bank, but some of the bankers objected to doing business with a gas station: We get a gas station that wants to install solar panels. We come into these sorts of dilemmas. Well, yeah, we like solar. We think that is a good thing... but, a gas station! Internally, in our credit committee we said it was too small a piece of the overall operation, and all they were doing was solar. It wasn’t like they came to us to say, ‘We want to also convert some pumps to ethanol’ (Marquis and Almandoz 2012: 11).

In this case, everyone agreed with the organization’s values and mission, but some disagreed on the implications of particular loan decisions for the organization. Thus, a leader in a social enterprise organization may need not only to inspire a commitment to a shared purpose, but also to moderate discussions, resolve disagreements about what the purpose entails, and manage internal conflicts (Selznick 1957: 63), avoiding even the appearance of mission drift.

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Purpose is becoming more salient among publicly traded corporations because society is demanding from them more social responsibility. Therefore, this model of leadership in the context of social enterprise may be increasingly relevant for public corporations aspiring to give more weight to social purpose. For example, research on corporate social responsibility documents how corporations have been acquiring socially responsible organizations as a way of “buying CSR” (Wickert et al. 2017), which gives those corporations social credit. This greater commitment to society comes at an opportune moment when economic inequality is on the rise, when it becomes clearer that climate change may bring devastation, and when large investors increasingly realize that short-term profitability may be at odds with long-term sustainability. Large institutional investors, who own significant shares of the whole economy, are more aware than ever that they have a stake in the well-being of society, and thus they are beginning to put pressure on corporations to have higher aims than simply larger profit margins (Fink 2018; Khurana 2010). Increasingly, corporations may search for leaders with an enlarged social mindset in the Selznickian sense—leaders able to define a mission, embody it throughout the organization, maintain the organization’s values and identity, and resolve internal conflicts stemming from the organization’s multiple aims (Selznick 1957:63–64).

Establishing Governance Mechanisms to Achieve Purpose Social enterprises, like traditional organizations, need to create governance mechanisms that will maintain the centrality of the social purpose. When social and business missions are equally relevant, they may need equal representation on the governing board (Pache and Santos 2010). However, this may bring about conflict when directors from different camps disagree (Battilana and Dorado 2010; Glynn 2000), and leaders must be capable of mediating mission-related conflicts at the board level. For successful governance of the mission, it may be desirable to partner with external organizations, such as the B Lab (Marquis et al. 2010), The Global Reporting Initiative, and the Sustainability Accounting Standards Board, to help organizations assess, benchmark, and validate their own social performance. Leaders need to buy into the dual mission and appreciate its nuances and implications. Leaders must embody, guard, and represent both financial and social missions, and they must drive the organization’s performance in both missions. It is not enough for leaders to state and define a social mission, they must also specify measurable KPIs, and hold people accountable for their achievement. An abstract mission statement devoid of accountability could easily become an empty gesture of little consequence. Leaders should seek to recruit people with a predisposition to both business and social purpose. When needed, they must be able to bridge groups representing both kinds of mission and create mechanisms for deliberation when goals are in conflict.

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Perspectives for Future Research The integral model of leadership offers several directions for future research. First, it suggests the adoption of a simple yet comprehensive conceptualization and operationalization of leadership performance (Barrow 1977), which could be especially helpful for purpose-led organizations. According to the model, merely generating economic results for organizations does not qualify individuals as good leaders. To be “integral” and holistic, indicators of leadership performance need to include the people and purpose dimensions as well. In other words, leadership performance indicators could include such factors as the extent to which and in what ways leaders have made (or not made) positive and developmental impacts on the people working with them. Similarly, other factors could include the extent to which and in what ways leaders have contributed (or not contributed) to the benefits of the wider community through their work, in line with the purpose of the organization. Future research may develop such comprehensive indicators of leadership performance (Ebrahim 2019) and apply them in leadership research so as to obtain deeper insights into leadership effectiveness beyond pure economic parameters. Secondly, as a prominent management paradigm, contingency theory of leadership (Fiedler 1964) would take the view that as there is no one-size-fits-all model of leadership, leaders need to pay attention to just one leadership dimension in the integral model depending on the specific contexts. Acknowledging the value of contingency perspectives in addressing short-term needs, we contend that the leadership approach proposed by our integral model offers leaders broader resources and strengths to thrive in the longer term. We believe this long-term perspective would be especially helpful when considering the impact of leadership on wider domains, not just a team or an organization, but an industrial sector or society as a whole. While there is something to be said for focus and contingency approaches, we believe that sustainable leadership may require ongoing attention to all three dimensions of leadership. However, research is needed to shed light on such a hypothesis and to provide insights regarding how the integral model of leadership may be reconciled with the contingency paradigm. Research may also be needed to study the trade-offs between a focused approach, more in line with the contingency model, and a balancing approach such as our own. Longitudinal studies may be of great value in determining whether the balancing approach is really more beneficial in the long run. Third, the key to leadership according to the integral model is the ability of managers to exercise sound judgment in adequately balancing priorities. Although scholars have started to pay attention to similar balancing behaviors, such as through a paradox mindset (e.g., Miron-Spektor et al. 2018), there is a dire need for research aimed at a deeper understanding of the art and dynamics of balancing. The literature on hybrid organizations may offer a good start, but there may be opportunities to develop specific behavioral guidelines for balancing when leaders face competing demands. A related question may be how companies might train leaders to develop stronger balancing capabilities. One possibility may be to find synergies and

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mechanisms connecting the leadership dimensions. For example, results may be obtained by developing people or by fostering a compelling purpose. In the same way, a sense of purpose may be strengthened in the process of developing people or achieving challenging results; and similarly, companies may develop people, by stretching their performance targets or by aligning their motivations with the purpose of the organization. Fourth, this integral model of leadership has important implications for business ethics, going beyond a minimalist view focused on simply complying with legal or cultural standards. This perspective is aligned with a virtue-based understanding of ethics (Sison et al. 2012) oriented towards excellence (Sison and Ferrero 2015), considered here in the three distinct dimensions: business results, peopledevelopment, and service to others. Integral leadership within this broader framework would be about fostering “organizational virtue” (Moore and Beadle 2006), which would involve developing sustainable and widespread habits and cultural mindsets within the organization that facilitate virtuous behaviors along those dimensions. Sound judgment—prudence—would be required not only to choose the most appropriate means to achieve each of those ends but also to appropriately balance those ends with respect to each other. What may be possible and prudent in social enterprise organizations is likely to be more other-oriented and prosocial than in public corporations.

Conclusion We have developed an integral model of leadership in social enterprises, which captures three distinctive dimensions of leadership: first, an organizational dimension focused on achieving complex business and social results; second, a people dimension by setting the conditions for employees’ intrinsic motivation while facilitating inclusion; and finally a purpose dimension by making a positive impact on the company’s beneficiaries. While the context of much of this discussion has been leadership in social enterprise organizations, this integral model of leadership is relevant to many, if not all, business organizations as well. The only difference may be how much weight organizations place on each of these three dimensions, especially purpose. In the current environment, where many politicians, scholars, and business leaders are attempting to re-imagine capitalism, a new model of societycentered leadership for business organizations may be required. This model, we suggest, would have purpose at the core and would require a dynamic balancing between the achievement of complex results and the building up of people. Indeed, many conversations about the reform of capitalism make references to the centrality of purpose and its governance, so that purpose (however it is defined in particular organizations), and not profit, becomes the central focus of attention. For those business organizations that have already accepted a purpose-driven orientation, everything that is said in this paper about leadership is highly relevant.

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Acknowledgements We are grateful for the insights and feedback from Nino Vaccaro and Carlos Rey as well as for the writing and editorial support of Anthony Salvia, Emmalee Moffitt, and Nana Yaa A. Gyamfi. We are grateful for the support of the Juan Antonio Perez Lopez Chair at IESE Business School.

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John Almandoz is a professor in the Department of Managing People in Organizations at IESE Business School, Av. Pearson, 21, 08034 Barcelona, Spain (e-mail: [email protected]; Phone: +1 (646) 346-8881). His current research focuses on institutional logics and the management of multiple missions, with particular emphasis on community banking and impact investing. He received his Ph.D. in sociology and organizational behavior from Harvard University. Yih-Teen Lee is a professor in the Department of Managing People in Organizations at IESE Business School, Av. Pearson, 21, 08034 Barcelona, Spain (e-mail: [email protected]; Phone: +34 93 2534200). His current research focuses on leadership in a global context and in multicultural teams, cultural identities and bridging, and leading organizations and teams to achieve greater meaningfulness in work. He received his Ph.D. in management from HEC, University of Lausanne.

Chapter 6

Spirituality and the Social Enterprise: A Paradox Lens Miguel Pina e Cunha, Miguel Alves Martins, Arménio Rego, and Ricardo Zózimo

Abstract This chapter theorizes spirituality in the social enterprise through a paradox lens. It discusses how: (1) social enterprises are different but potentially incorporate a strong spiritual dimension; (2) because of organizational differences, spirituality manifests in different ways in different types of social organizations (e.g., the spiritual dimension of a B-Corp is more conceptual, an idea, whereas in a community organization, it is direct, almost palpable); (3) expressions of organizational spirituality may have a paradoxical component. We defend that, for these reasons, the management of social enterprises incorporates a consideration of the spiritual dimension as well as of the paradoxes that emerge from tackling the spiritual (mission-based) and pragmatic (commerce-based) logics that are involved. Social enterprises are possibly more affected by denser nets of competing demands – which turns them into valuable sources of learning for other companies regarding how to live with paradox. Keywords Spirituality · Paradoxes · Social enterprises

Introduction Spirituality is often considered to be far removed from business-like organizations (Tracey 2012). However, as Margaret Benefiel (2003, p. 383) noted, “spirituality and management, once thought incompatible, have in the past decade fallen in love”. In the last two or three decades, a transcendental dimension and the experience of meaning at work has come to be considered central to a positive theory of organization and management (Cunha et al. 2020). Spirituality in organizations may be M. P. e. Cunha (*) · M. A. Martins · R. Zózimo Nova School of Business and Economics, Universidade Nova de Lisboa, Carcavelos, Portugal e-mail: [email protected]; [email protected]; [email protected] A. Rego Católica Porto Business School and Business Research Unit, Instituto Universitário de Lisboa, ISCTE-IUL, Porto, Portugal e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_6

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considered at several levels (e.g., individual, team, organization), and workplace or organizational spirituality may thus be defined as “aspects of the workplace, either in the individual, the group, or the organization, that promote individual feelings of satisfaction through transcendence” (Giacalone and Jurkiewicz 2010, p. 13). Therefore, workplace or organizational spirituality has an ethical content and, when appropriately handled, may nurture the “whole person” (Sheep 2006). Such a transcendental dimension is even more central in social enterprises (i.e., “those organizations that use trade and business principles in the pursuit of social aims”; Kay 2005, p. 168), which constitute the central focus of this chapter. In fact, the social-business nature of social enterprises makes them more predisposed to nurture wholeness, potentially imbuing them with a humane advantage. In comparison with “for-profit” organizations, social enterprises offer more opportunities and experiences of transcendence, connection, completeness, and joy (Giacalone and Jurkiewicz 2010). However, such a desideratum is neither linear nor guaranteed. Tensions within the spiritual domain (e.g., the experience of transcendence may emerge from empathizing with others’ suffering, which will hardly lead to joy) as well as between spiritual and pragmatic realms, may unfold, as the search for transcendence occurs with simultaneous pragmatic organizational considerations (March and Weil 2005; Teasdale 2012) that create friction between the spiritual logic of mission and the pragmatic logic of business. Because these tensions tend to persist, they may qualify as paradoxes. Paradox refers to persisting tensions between interdependent, mutually defining opposites (Smith and Lewis 2011). Paradoxes associated with workplace spirituality are particularly salient within social enterprises, as these organizations are likely to connect individuals and other organizations to their own mission and purpose, while still seeking to be financially viable. At the same time, these two forces – a missionary orientation and the need to achieve financial sustainability – bring paradoxes to the fore at different organizational levels. This chapter, which explores the paradoxes raised in social enterprises, assumes the following: (1) social enterprises differ from for commercial ventures and may incorporate a strong spiritual dimension; (2) mindful of the distinct organizational forms within the social enterprise umbrella, we distinguish between how workplace spirituality is expressed at each organizational form (e.g., the spiritual dimension of a B-Corp is more conceptual, an idea, whereas in a community organization, it is direct, almost palpable; (3) different social organizational forms stimulate different types of spiritual paradoxes. The chapter is organized as follows. We start by contextualizing the broad range of social enterprises identified in the literature. Then we develop conceptual insight by describing the key spiritual emphasis characteristic of social enterprises. We discuss the search for spiritual inspiration in social enterprises and the paradoxes potentially emanating from a spiritual view of organizations. After discussing paradoxes associated with each spirituality dimension, we discuss four paradoxes operating at different levels of analysis (i.e., individual, team, organizational, and societal): paradoxes of service, team spirit, purpose, and social impact. The two perspectives are intertwined (for example, the paradox of transcendence is embedded

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in individuals, teams, and organizations), but are conceptually more transparent when discussed separately. We suspect that many challenges confronting the spiritual social enterprise are relevant for other organizational forms, and as a result, we study organizations engaged in social enterprise as a transparent case (Flyvbjerg 2006), thereby rendering the spiritual dimension more observable (and explicitly assumed) than in other cases, given the prevailing ideologies of organizations to be oriented mainly to their shareholders. In summary, because their missionary ethos can be hypothesized as spiritually richer than the one observed in commercial ventures, social enterprises are also possibly more affected by denser nets of competing demands – which turns them into valuable sources of learning for other companies regarding how to live with paradox. This is an important endeavor as the case of social organizations is more revealing of the need to treat some tensions as paradoxes – i.e. as mutually defining, equally desirable, non-resolvable opposites rather than as trade-offs, as is often the case in management and organization theory.

Social Enterprise and Workplace Spirituality Social enterprises may be defined as bottom line organizations that seek to address societal problems through business ventures, thus having a dual nature: social and commercial. Examples of social enterprises are work integration social ventures that provide employment opportunities to marginalized, long-term unemployed individuals (Pache and Santos 2013), and impact investing ventures, that provide debt and equity capital to social initiatives (Hehenberger et al. 2019). Social enterprises differ from social innovation in that the latter refers to new products, services, organizational forms and business models, which address more efficiently and effectively social or environmental problems (Ramus et al. 2018).1 Before discussing each type of social enterprise and the respective potential for workers’ spiritual experience, some notes are necessary to clarify the meaning and content of spirituality in organizations. Workplace spirituality refers to “organizational values evidenced in the culture that promotes employees’ experience of transcendence through the work progress, facilitating their sense of being connected to others in a way that provides feelings of completeness and joy” (Giacalone and Jurkiewicz 2010, p. 13). This conceptualization differentiates workplace spirituality from other expressions of spiritual engagement that may contain manipulative intentions, such as some forms of normative cultural control. Organizational spirituality may thus ideally constitute a source of freedom, meaning, and transcendence (Cunha et al. 2006; Rego and Cunha 2008). Employees experience spirituality in organizations when they see their work “as a spiritual path, as an opportunity to grow personally and to contribute to society in a meaningful way” (Balog et al. 2014, p. 162).

1

We borrow the two definitions from one of the reviewers, who recommended including them in the chapter. We are grateful to the reviewer.

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It is likely that people engage with more rewarding work experiences in organizations such as social enterprises, but paradoxically it is also possible that employees experience spirituality even in toxic organizational environments (Padilla et al. 2007). For example, an employee may interpret his/her role in a toxic organization as being spirituality-driven as he/she frames the job as a spiritual path toward personal growth by helping to soften or relieve other employees’ suffering (Driver 2007). Such a stance does not necessarily imply religious beliefs and religiosity, which differ from spirituality in that religion refers to formal, institutional, organized, and ritualized expressions of spirituality. It may even happen that a religious workplace becomes a source of spiritual suffering if religiosity assumes a total institutional logic and endangers the spiritual inner-life of some employees. The virtuous mission and the positive social nature associated with social enterprises may be affected by a similar danger: the good for community may lead to a total institutional path, and social enterprises or companies with a strong socially meaningful appeal are not exempt of toxic management and leadership practices (see, e.g. Chafkin and Cao [2017], on the case of Etsy, an organization certified as a B-Corp, or the case of Theranos, whose declared mission was a façade for fraud [Carreyrou 2019]). With these conceptual precautions in mind, we now discuss critical dimensions of workplace spirituality in the social organization.

Dimensions of Spirituality in the Social Enterprise While the notion of the social enterprise has become popular in recent years to define organizations that combine social and business logics (Smith et al. 2013), scholarship has for long emphasized the multiple forms adopted by those organizations (Choi and Majumdar 2014; Dacin et al. 2011; Mair and Martí 2006). A substantial amount of work has detailed the benefits of social organizations in tackling social problems (Montgomery et al. 2012) and the many organizational configurations available to make this possible (Zahra et al. 2009). Scholars have also explored the differing business models adopted by these organizations (Seelos and Mair 2005), their key building blocks (Elkington and Hartigan 2008), and the individual and collective mindsets prevailing in these organizations (Renko 2012). As summarized by several reviews of the literature, social enterprise is a broad field and one in which scholarship has continued to describe a multitude of forms and benefits enacted by social organizations rather than converging on a single theoretical frame (Peredo and McLean 2006; Phillips et al. 2015). Taking this diversity of models and approaches into consideration (Thompson and Bob 2006), our starting point is that different social organizational forms will manifest their spiritual richness in different ways. Next, we describe each of these forms, highlighting the spiritual salience of those dimensions and how spirituality pertains to the realm of social enterprises. To clarify our reasoning, we use both (a) Giacalone and Jurkiewicz’s (2010) model, which covers the dimensions of transcendence, connection, feelings of completeness, and joy, and (b) Rego and

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colleagues (2007) framework, which includes five dimensions: team sense of community, alignment with organizational values, sense of contribution to society, enjoyment at work, and opportunities for inner life. We embrace these two models to emphasize that social enterprises are, by nature and design, organizational spaces where spirituality is central rather than a motivational tool. However, in a later section, and considering both the overlap between the two frameworks and the foundational nature of Giacalone and Jurkiewicz’s model, we focus on the former to deepen our analysis and discuss the bases that lead us to explore the paradoxes potentially rendered salient in the spirituality dimensions of social enterprises. Before proceeding, it is important to note that the association between each type of social enterprise and each spirituality dimension is tentative and exploratory. The presence of specific spirituality dimensions in a specific social enterprise depends on several factors (e.g., leadership practices) beyond those related to organizational form and identity. Different social organizations will elicit different spiritual challenges (Table 6.1).

Social Enterprises Social enterprises originate in the enterprising efforts of traditional nonprofit organizations (Dees 1998). While we use the term “social enterprise” more broadly to define organizational forms that aim to seek to achieve a social mission through business ventures (Smith et al. 2013), these institutional social enterprises are based on the legal forms encouraged in several countries (Alter 2009). As an example, Semear (https://www.semear.pt/) is devoted to the inclusion of people with disabilities. The revenues are reinvested in the organization. Semear trains people to produce vegetables that are sold mainly through Jerónimo Martins, a major Portuguese retailer. Social enterprises are created and developed with a dual purpose – to address a social problem and to be economically and financially sustainable (Chell 2007), implying a creative approach in the way they operate and how they measure success (Shaw and Carter 2007). This dual-purpose shapes the spiritual expressions allowed, with their main feature being service. Because they have a social mission, the spiritual ethos of the social enterprise relates to the discovery of better ways to serve. From Giacalone and Jurkiewicz’s (2010) perspective, the central spirituality dimensions present in these social enterprises are transcendence and connection. According to Rego and colleagues (2007), the sense of contribution to society and the alignment with organizational values constitute relevant workplace spirituality dimensions. It is commonly accepted that these institutional social enterprises offer complementary perspectives to established solutions (Harding 2004) and that in so doing, configure their role in society in order to serve.

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Table 6.1 Social organizations and their implications for organizational spirituality Type Institutional social enterprises

Social entrepreneurship organizations

Description Social enterprises are legally forms of social entrepreneurship organizations commonly found in many developed countries (Alter 2009). They seek to introduce alternative solutions to social problems and often originate in non-profits (Dees 1998). They are enterprising as they seek to be sustainable and to find long lasting solutions to these social problems (Chell 2007). Organizations that emerge and develop by focusing on solving local and often neglected social problems (Zahra et al. 2009).

Community based enterprises

Community based enterprises focus on developing strategies and activities for sustainable local development in poor populations (Peredo and Chrisman 2006).

Hybrid organizations

While there is a wide spectrum of hybrid organizations, the literature tends to assume that hybrid organizations navigate the duality of social impact alongside financial sustainability. The term “hybrid organization” reflects the propensity of such enterprises to blend traditionally for-profit practices with traditionally nonprofit practices (Haigh et al. 2015; Smith et al. 2013). B-Corps are a novel organizational form that by design takes into consideration the social, societal, and environmental impact in the world that surrounds them (Gehman and Grimes 2017).

B-corps

How spirituality is regarded The spiritual emphasis of these organizations is in service. Through spiritually rich workplaces they develop an advanced and comprehensive sense of service that is based on meaning. Meaningful service is then a key trait of their spirituality.

Spirituality is the glue that connects place, organization, and team. Through a spiritual connection to the place and the origins of the problem, founders begin to believe they can develop solutions. This belief forms the essence of their mission, which informs their team spirit and how they approach solving local problems. As these organizations are typically at the intersection of individuals, community, and the environment, their intrinsic spirituality is shaped by notions of collectiveness and joint impact. By designing and achieving together, these community-based enterprises also experience a deep sense of collaborative achievement that pervades their actions and activities. The spiritual emphasis of these organizations is on learning. As they progress in the journey toward hybridity, intrinsic learning is a key spiritual dimension that emerges. The flows of internal and external learning toward hybridity helps to create the appropriate mechanisms and facilitates how the organization adopts and excels with a hybrid identity over time. B-corps are organizations that by design construct, devise, and develop an advanced sense of purpose. Purpose is also their core spiritual trait and the guiding principle that organizes their activities, the way they operate in the world, and how they measure their success.

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Social Entrepreneurship Ventures Social entrepreneurship ventures – entrepreneurial organizations having a social outlook (Sharir and Lerner 2006) – aim to find models and solutions that work as alternatives to those used earlier (Zahra et al. 2009). The work of these organizations derives from the lack of support from the market and state in relation to important or neglected social problems or a substantial change in the broader funding landscape (Dees 1998); nevertheless, these organizations are necessarily sensitive to institutional complexity (Ramus et al. 2017). Mary Gordon established Roots of Empathy (https://rootsofempathy.org/), “an international organization that offers empathybased programs for children, with research to prove impact. It is a leader in the empathy movement”. Roots of Empathy exists due to the belief that empathy is a crucial element to break the intergenerational cycle of violence and poor parenting. Social entrepreneurship ventures emerge from a genuine desire to address a neglected social problem, their spiritual roots residing in the mission. In social entrepreneurship organizations, spirituality articulates two important dimensions: place and team. First, spirituality ignites the belief that better solutions for local problems can be identified. This is often expressed in their mission, which becomes a central spiritual artifact. The mission is invoked at crucial moments and purposefully incorporated in everyday life. Second, team members experience spirituality in the way they connect with the mission, in an attempt to develop adequate solutions to tackle neglected local social problems. Spirituality thus derives from how team members connect with the organization. From the perspective of Giacalone and Jurkiewicz (2010), central spirituality dimensions of social entrepreneurship ventures are transcendence and the sense of connection: work itself is a mission.

Community-Based Enterprises Community-based enterprises are a particular form of social enterprise centered around local communities that have specific social problems (Peredo and Chrisman 2006). Also called community-led social ventures (Haugh 2007), these organizations bring together the assets and strengths of a community to develop solutions that embrace local social problems. For example, Just a Change (https://www. justachange.pt/impacto?lang¼en#) is a community organization that fights housing poverty in Portugal, mainly with university student volunteers and donations of materials. António Bello, the founder, was nominated Ashoka Fellow, a high recognition for social entrepreneurs. The project’s community base makes it a project enjoying enthusiastic participation. In projects such as Just a Change, which leverage on the collective, the main spiritual dimension refers to the co-creation process involving actors in these communities. Co-created interventions lead to high and sustained impact as members of the community invest personally and collectively through joint work and enterprise. The dimensions of workplace

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spirituality more salient in these enterprises are the sense of contribution, the team’s sense of community, and enjoyment at work – or, to use Giacalone and Jurkiewicz’s (2010) framework, transcendence, connection, completeness, and joy. This is because of direct experiences of contact and impact with beneficiaries as well as the small scale of organizations that favor a sense of team spirit.

Hybrid Organizations The literature has also qualified hybrid organizations as a particular organizational form of social enterprise. As organizations that combine logics, “enterprises that design their business models based on the alleviation of a particular social or environmental issue” (Haigh et al. 2015, p. 5), hybrid organizations harmonize commercial and social logics, for-profit practices with a nonprofit orientation (Haigh et al. 2015).2 Veja (https://www.veja-store.com/), a French footwear company, shows a strong concern about the sourcing of materials. It cares about sustainability throughout its supply chain and measures financial and social impact. While hybridity can refer to commercial enterprises becoming more social (Lee and Jay 2015), within the context of social enterprise, it is common to define hybrid organizations as social organizations that engage on a journey to become more commercially savvy (Smith et al. 2012), thus also being more prepared to pursue societal good. The main spirituality driver of the hybrid organizations is the sense of transcendence (Giacalone and Jurkiewicz 2010) – or, from Rego and Cunha’s (2007) perspective, the sense of contribution to society because work is richer in purpose and meaning than when organizations follow a single commercial logic. Considering that hybridization requires new ways of seeing the world, where possibilities flourish while attempting to balance contradictory views and practices (Cunha et al. 2019a), hybrid organizations are the type of social enterprise in which paradoxical challenges are potentially more salient, as they are explicit and nurtured (Smith and Cunha 2020).

B-Corps B Corporations, commonly known as B-Corps, constitute a novel organizational form that by design incorporates the social, societal, and environmental impacts of their operation (Gehman and Grimes 2017). Hovione (www.hovione.pt) is an

2

We acknowledge that social enterprises can be framed as hybrids using a logics perspective, in this case being called social-commercial hybrids. But hybrids go beyond the field of social enterprise: private hospitals, business schools, and professional organizations can be framed, and have been framed, as hybrids.

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international pharmaceutical company, the first pharma to be certified as a B-Corp. B-Corps need to formally change their status in order to (1) include a mission, and (2) assure that the company aims not only to maximize shareholder value but also that it takes stakeholders into account. B-Corps are certified by B Lab (a nonprofit) and meet specific standards of social and environmental performance, accountability, and transparency (Chen and Roberts 2013). They need to undergo the B Impact Assessment and obtain at least 80 out of 200 points (assessing impact in several dimensions). At the spiritual core of these organizations lies an organizational sense of purpose (Hollensbe et al. 2014) initiated by the leadership team and encompassing the entire scope of the business activity. B-Corps can be considered as an organizational form of social enterprise since they work toward the sustainable development of products and services while being financially solid. Purpose is deeply embedded in the way B-Corps develop relationships with their team members. These relationships – based on trust, dignity, and reciprocity – offer the possibility of sharing a purpose across the organization which, in turn, is more likely to lead to a sustainable and inclusive transformation of industries and markets. Purpose (i.e., sense of contribution to society), team sense of community (i.e., connection), and alignment with organizational values (i.e., connection and completeness) are spiritual dimensions central to the B-Corp, as they support the articulation of the vision, mission, business models, and ultimately the overarching identity and action of the organization. What the above discussion suggests is that: (1) each type of social enterprise embraces some form of organizational spirituality and (2) organizational spirituality is not expressed uniformly across the social organizational landscape. The following section explores the key spiritual dimensions affecting each form of social enterprise and discusses how the effects involve a paradoxical facet. In other words, “spirituality” necessarily means different things for a multinational B Corp and to a small, community-rooted social enterprise.

Key Dimensions of Organizational Spirituality Interest in workplace spirituality has increased, but work in the area of social enterprise spirituality is still limited. We develop conceptual insight into the spiritual core of social enterprises and discuss paradoxes associated with managing these dimensions. As considered above, we draw on the key dimensions (transcendence, connection, completeness, and joy) advanced by Giacalone and Jurkiewicz (2010) to lay the paradoxical changes that we later explore in relation to the development of spiritually rich workplaces.

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Transcendence Transcendence, a dimension of humanistic management (Melé 2016), derives from the Latin scandere, to climb. It refers to work as having a dimension that expands the activity itself, something that extends beyond the limits of ordinary experience. Transcendence is at the basis of a sense of achievement that is typical of the community-oriented enterprises constituted to tackle complex local problems. By focusing on the creation of viable and sustainable solutions to persistent community problems, transcendence occurs when solutions are discovered and the community is actively engaged with the problems to be addressed. A sense of transcendence is also associated with community organizations, considering the benefits and impact that derive from their solutions. This is in line with the definition of transcendence that resonates the notion of the sacred: transcendence is sometimes referred to as the “sacred dimension” of work (Adler 2016, p. 185). Nevertheless, the sense of transcendence is present in other forms of social enterprises as well, and is the focus on a better good that motivates (most of) these organizations. It is this sense that may provide meaning to the work of an enterprise’s employees, even though this meaningful experience depends on the interaction between the employees’ values and beliefs and social enterprise values and mission. However, this interaction is not uniformly embraced by all employees. Paradoxes may emerge because the search for transcendence and for rich inner life may harm the search for connection. Suffering and sorrow, rather than joy, may be associated with deep relational experiences with the difficult conditions of the beneficiaries (a nurse may experience transcendence and empathic suffering, not joy, when treating terminal patients; see e.g., Frost [2007]). In these circumstances it is suffering and sorrow rather than joy that leads to the experience of meaning at work. Because personal growth may occur via the alleviation of suffering, these tensions may give meaning to work and provide a spiritual dimension that is absent when the desired outcome is job satisfaction, which Koprowski (1981) qualified as the equivalent of seeing workers as contented cows. Accomplishing one’s mission may even require role complementarity, such as the good-cop/bad-cop approach in law enforcement, because the tensions involved may be too complex to be undertaken by the same person (Wenzel et al. 2019). This does not mean, however, that one does not experience joy – for example, from realizing how happy and lucky one is compared with those that social enterprise serves. In a certain way, gratefulness may come from sorrow when framed within a meaningful purpose. Another tension emerges when cultivating a sense of transcendence by working with people whose conditions necessitate a grounded approach to work. Pragmatically, this implies both (a) empathy and perspective-getting (Eyal et al. 2018) toward those served by the transcendent purpose, and (b) the socioemotional distance necessary to adopt a well-grounded approach (Waytz 2016). The paradox may lead to a problematic outcome if it is not addressed appropriately. An example is a social enterprise whose purpose is preparing disadvantaged people (e.g., homeless people) for placement in the mainstream labor market. Considering that (a) the

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homeless people who need greater support are harder to place than those needing less support, and that (b) the social enterprise is subsidized by public funds for each person placed into employment, there are risks of “cream[ing] off the least disadvantaged” (Teasdale 2012, p. 519; see also Teasdale 2010), moving from the social pole toward the economic one. The transcendental mission of integral human development that serves as the North Star of this type of organization (e.g., Mongelli et al. 2018) is thus diminished because of its divergent performance indicators.

Connection The term “connection” derives from the Latin connexionem or togetherness. Work possesses a spiritual dimension when it incorporates a sense of community and togetherness. In the case of social organizations, this dimension emphasizes three key aspects. Social organizations tend to be close to their beneficiaries (e.g., employees working together with homeless employees in a social enterprise combating homelessness; Teasdale 2012), and are thereby more able to understand the challenges and deprivation of the individuals they were asked to serve. One could predict that it is the transcendent goal that nurtures the sense of connection. However, the sense of connection also grows among employees who identify with the mission and realize that cooperation and mutual help are necessary in order to pursue it. Employees may thus develop a sense of (internal) community aimed at pursuing a meaningful mission in favor of the (external) community. Social entrepreneurship ventures may develop a genuine sense of teamwork based on their mission. These ventures are deeply embedded in their community and do not serve as economic producers of goods or services that they sell in the market. This mindset favors the creation of organizational cultures characterized by humility (Maldonado et al. 2018) developing a capacity to listen, engage, and connect multiple stakeholders across the community. In these projects, work is about articulating place, venture, and team, in order to develop solutions for neglected social problems. This imparts a unique character to these organizations – even though connection is probably present in all the other forms of social enterprise. This sense is felt more directly than in organizations whose mission is articulated at a higher level and is received in more abstract terms (such as in B Corps), given direct contact with beneficiaries. Paradoxes may emerge around a sense of connection because experiencing connectedness among employees committed to an ideal may jeopardize the connectedness with the public served by the social enterprise – the employees focusing more on satisfying their needs of relatedness and reaffirming their good intentions than on serving those in need. In extreme cases groupthink effects (Esser 1998) may even arise, as the protection of internal cohesiveness is done at the cost of ignoring those that the team is expected to serve. Empathy toward those served by the transcendent purpose may also require being less empathetic toward organizational members who

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are less committed and engaged in the purpose. According to the organization’s mission, adopting internal market mechanisms such as merit and performance management may be perceived as inadequate.

Completeness Because social enterprises are purposefully social but designed in a commercial way (Austin et al. 2006), they offer a sense of wholeness that can be intrinsically gratifying. These organizations do not measure success in strictly economic terms, but define social metrics that offer a more encompassing measure of success. As such, social enterprises depart from and challenge established views of shareholder capitalism, which regards organizations as profit-making machines (Friedman 1970). By offering a more complete set of performance metrics, success as measured by social enterprises can create a strong link with their original mission and start-up spirit (Gulati 2019). By framing success via the incorporation of economic and human dimensions, social enterprises embrace more complete roles in the resolution of challenges by widening the portfolio of solutions. Social enterprises also give their members the possibility to satisfy not only biological and “economic” needs, but also other dimensions of “humankind’s essential humanness” (Kets de Vries 2001, p. 106): attachment/affiliation, and exploration and assertion. The sense of wholeness emanating from working for organizations with a strong social orientation comes from the possibility to nurture the senses of purpose, meaning, congruence, enjoyment and, ideally, the senses of self-determination and competence (Kets de Vries 2001). The sense of wholeness is potential but not certain – it depends not only on the meaningful mission of the organization but also on leadership and management practices that affect social relationships and the work design. Aspirations of completeness may, however, lead toward the creation of total institutional cultures (Goffman 1968). Social organizations risk being so inclusive of multiple domains in the life of their members that they may end up excluding other domains because of the nobility of their mission calling for full dedication. What in principle should be gratifying may become alienating, and a potentially liberating organization may become a mental prison (Morgan 1980), which may explain social entrepreneur burnout, with people becoming captives of the mission (Kibler et al. 2018). In our experience, social entrepreneurs may become dogmatic precisely because of purpose: the mission is so evidently noble that they cannot accept hesitation in the place of devotion. According to the World Economic Forum, about 50% of the social entrepreneurs attending its 2018 Annual Meeting reported struggling with depression and burnout (see Zimmer and Pearson 2018).

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Joy Working in organizations with a missionary component (Mintzberg 1985) may be viewed as a source of wellbeing and personal fulfillment. Joy is related with the spiritual benefits and the psychological energy provided by meaningful work (Cable 2019). However, the experience of work is often at odds with the sources of spiritual growth (Gallup 2017). In many organizations work is no more than a tripalium (Komlosy 2018), a torturous journey. A positive approach is necessary for organizations aspiring to be viewed as meaningful to their members as well as for other constituencies (Cunha et al. 2020; Pfeffer 2003). Social enterprises, in comparison with business firms, have more potential to create work as a path to flourishing and as providing a measure of joy, expressed for example in feelings of pleasure and satisfaction (Goffee and Jones 2013). Feelings of joy and meaning in social enterprises may, however, incorporate a paradoxical dimension as these organizations, because they tackle important social issues, sometimes operate in the vicinity of human suffering. Thus, joy is not a feature to be taken lightly, the joy of doing important work may coexist with the need to learn to experience the full emotional spectrum, which can lead to self-harm. Good and bad may paradoxically coexist.

Paradoxes: Nested and Interwoven After articulating different forms of social organizations and discussing some paradoxes associated with the spirituality of these organizations, we now explore the interface of the social-spiritual-organizational paradoxes at different levels (e.g., individual, team, organizational, and inter-organizational). This section considers a sample of tensions in and around spirituality arising in the operation of social enterprises. To do so we revisit key spiritual dimensions to consider four paradoxical tensions activated by social enterprising (see Table 6.2 for a summary). The boundaries of those paradoxes are porous, meaning that paradoxes at one level are affected and affect paradoxes at other levels (Fig. 6.1), i.e., paradoxes are interwoven with other paradoxes (Cunha et al. 2021). In the same vein, for social organizations to liberate their spiritual potential, several tensions need to be woven together into their fabric as part of daily activity, approached not as tensions to be eliminated but rather as dualities to be integrated or paradox poles to be balanced. In line with Smith et al. (2016), we consider that a “both-and” approach is necessary to find balance between spiritual and pragmatic considerations. The lack of balance makes the organization economically deprived or subverts its spiritual ethos. Our analysis translates complex cross-level interactions into relatively simple depictions of paradoxes as contained within paradoxes, just like Russian dolls. Yet

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Table 6.2 Paradoxes at different levels Paradox of service

Spiritual relevance Service in terms of organizational spirituality refers to the primacy of the other. It is relevant spiritually as it fulfills individual human needs of belonging, contributing, and respect (Maslow 1965)

Paradox of team spirit

Team spirit refers to full inclusion in a team, membership, and closeness. Teams satisfy basic human needs, and potentially offer safe learning spaces that fulfill needs for growth (Hackman and Oldham 1980)

Paradox of purpose

Purpose defines an organization’s raison d’être, explaining why the organization exists. Purpose transcends goals and explains the role of the organization in society.

Paradox of social impact

Social impact represents a view that broadens the role of organizations in society as fulfilling social ends via sustainability-oriented means.

Paradox content Service is central for the social organizations. Yet for some actors in managerial positions, serving others must be combined with leading and influencing others as well as guiding them. This demands a paradoxical representation of working and leading, one that balances using power to empower (Cunha et al. 2019b). Team spirit has been portrayed as a paradoxical state in which collectives balance opposing demands such as proximity and distance. In the social organization this may be particularly demanding as organizational members are expected to be close and caring but not too close, as the excess of proximity can be problematic for fulfilling one’s mission and for maintaining the team’s vibrancy (Kets de Vries 2011). Purpose is critical to define the identity and practice of social organizations. Yet an excess of identification with a purpose can degenerate into problematic choices, as organizational members a-critically accept their roles, with a missionary zeal that can become problematic. For purpose to act as a source of spiritual guidance, it implies identification and a critical distance. Social impact is a complex concept involving multiple dimensions. Ideally these metrics should be approached with a paradoxical bothand mindset but at times this may imply an either-or type of choice.

we invite our readers to consider that paradoxes are not static entities in which tensions are contained within the boundaries of levels, but nested and interwoven processes in which the tackling of one tension triggers another tension.

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Paradoxes of service Paradoxes of team spirit

Paradoxes of social impact

Paradoxes of purpose

Fig. 6.1 Spirituality in the social enterprise: Nested, interwoven paradoxes

Individuals: Paradoxes of Service Social enterprises are inclined to serve their constituencies via mission-driven actions supported by the creation of sustainable and viable economic business models. This facilitates an individual sense of contribution but imposes organizational discipline. Contribution, or service, refers to an “other”-orientation, a focus on “someone or something other than the leader” (Eva et al. 2018, p. 4). In organizations with a servant culture, individual members, including leaders, are portrayed as servants (Sousa and van Dierendonck 2017). Servant leadership implies a spiritual dimension as it has a focus on the wider interests of stakeholders and the larger community (Eva et al. 2018), transcending sectional economic interests. The spiritual component of social enterprises thus resides in their service orientation. Work transcends a professional occupation and consists of serving the other. An individual’s work is potentially taken as a calling (Biberman et al. 1999). Nurturing employees to a philosophy of service explains why some organizations have volunteer programs, namely those whose social approach occurs at the macro level (e.g., B-Corps). While varying in length – they can range from one day to many months – all of these programs seek to instill a sense that personal skills and competencies can serve deprived populations in addition to the usual paying customers. This is also at the heart of recent activity in corporate volunteering that tends to choose practices aligned with the organization’s competences. The practice may be a form of outsourcing job motivation (Grant 2012; Grant and Hofmann 2011). A mission

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nourished by servant leaders turns work into a service (Sousa and van Dierendonck 2017). In a social enterprise this service constitutes a noble activity. The very origin of the social enterprise in the non-profit sector accepts that organizations exist to serve beneficiaries by offering solutions that complement what others already do. Service is critical to address most challenges (George et al. 2016), but this often calls for larger organizational arrangements leading to internal goals that gradually take precedence over serving beneficiaries. Because of legacy and structural evolution, institutional social enterprises can become self-serving and focused on their sustainability rather than on helping to address the societal problem that justifies their very existence. The paradox of purpose vs. financial sustainability affects their sense of completeness, as the self-serving organization might lose sight of its original social mission and focus on sustaining the organization: the internal takes precedence over the external and the individual sense of service is affected. This has consequences for the creation of spiritually rich workplaces as it may stimulate a logic of instrumental survival, sometimes accompanied by a moral licensing type of reasoning (Klotz and Bolino 2013; MacAskill 2015): the organization’s service mission and discourse are so noble that its members can decouple words from deeds without threatening individual and organizational identity, given the ethos of service. Over time, the mission drifts away from its origins (Ramus and Vaccaro 2017), image decouples from substance, and spirituality becomes an empty vessel with organizations pretending to have social commitments that are not real (Gaim et al. 2021). Balancing this tension is necessary to develop a spiritually rich Eupsychian workplace, one that fulfills individual needs of belonging, contribution, and respect (Maslow 1965; Rego et al. 2008). This can create a cynical distance as people see a disconnect between the organization’s espoused identity and its actual practice. Organizations do, sometimes, create fake forms of spirituality with discursively moral leaders engaging in highly questionable practices.

Teams: Paradoxes of Team Spirit Social enterprises may appreciate the work of teams, as the sense of belonging is important for them and working in teams combines the senses of belonging and purpose. Teams in social entrepreneurship initiatives are sometimes composed of salaried and non-salaried individuals (such as in community organizations), occupying distinct executive and non-executive positions. Because of scarcity of funding, human capital tends to be short for the task at hand, requiring individuals to work together consistently for extended periods to accomplish their goals. Working in teams to solve social and societal problems develops a particular bond between team members as they experience togetherness; in organizations in general, work may gain a new transcendent meaning when it is done in real teams. By “real teams” we refer to those teams that, over time, build a shared collective identity that informs the identities of their members. Teams in social

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entrepreneurship ventures may develop a team spirit (Silva et al. 2014), a collective identity built around a noble purpose that enriches individual identities. Working in these teams may create a sense of spiritual connection between members imbued with an esprit de corps. Yet, an excess of a collective team spirit around a mission can be debilitating. Research has shown that teams benefit from a healthy tension between individual voice and a sense of care for the collective. An excessive emphasis on the collective mission will deprive social entrepreneurship organizations of a critical measure of diversity. Teams support spiritual expression when they cultivate diversity and psychological safety (Edmondson 2019) without imposing a hegemonic spiritual frame. Teams self-invested with a measure of selfrighteousness may become a hostile environment for people with different motivations and at the end spiritual richness can evolve into spiritual hegemony, with no place for the doubters. Spiritually inclusive organizations should be spaces of tolerance and openness.

Organizations: Paradoxes of Purpose In the face of grand human and environmental challenges (George et al. 2016), social enterprises can be seen as critical actors in the search of solutions for societal problems. Designed to succeed commercially, financially, socially, and environmentally (Hiller 2013), social enterprises offer a consequential purpose. This comes with its own paradoxes, as sustaining the purpose over time can be problematic. The maintenance of competing organizational logics can be difficult but is necessary to preserve the organization’s identity (Ramus et al. 2020). The actions and practices of social enterprises are bounded by their purpose, which defines why an organization exists, its remit and scope (Hollensbe et al. 2014). It offers a sense of shared collective meaning, while also constraining business boundaries and operational possibilities. Purpose defines the possibility of the why determining the how. Social enterprises approach purpose from a missionary stance. Instead of assuming economic results as their core outcome, a grand social purpose is the source of inspiration and psychological energy that animates the organization. A profound sense of joy can be observed when the purpose of a B-Corp meets a successful market. The same may happen in other kinds of social enterprises: You might derive a sense of joy from your participation in a community solar cooperative, a preschool cooperative, a local housing land trust, a neighborhood meal-sharing collective, a community garden, a community lending pool, and the democratic workplace where you work. Why do you derive joy? Because these activities have removed you substantially from the work and business structures that had you driven by a sense of scarcity and competition. Instead, you feel at home in your various communities. You secure your future, not by accumulating a surplus of wealth, but by deepening social ties that provide for you (Orsi 2017, p. 120).

Intense engagement with a purpose may create dangerous modes of identification, though. Due to this spiritual sense of identification, members of B-Corps can

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romanticize their work, instead of focusing on the dual goals of the organization (Ashforth and Reingen 2014). Thus, purpose benefits from a healthy tension between idealism and realism. Too strong a measure of idealism can lead to excessive expectations that will not be met in reality, but an excess of realism may deprive the organization of a sense of purpose in the pursuit of challenging and noble goals. Idealists can be frustrated by reality; realists may accept the status quo instead of changing it (Schabram and Maitlis 2017). For example, Fairtrade organizations have not always been effective in improving the lives of the poor producers. More social benefit can be achieved if instead of buying Fairtrade products at more expensive prices, individuals buy cheaper goods and donate the saved money to a cost-effective charity (MacAskill 2015). In the other extreme, an excessive sense of realism may deplete organizations of their sense of purpose and read mission statements cynically. Understanding purpose realistically helps to balance the management of this tension.

Inter-Organizational Networks: Paradoxes of Social Impact Social organizations may create impact by transforming places and people in alliances with other organizations, including the state and business firms. In fact, the scale and scope of social problems, some of them representing grand challenges, are normally too big to be accomplished by social organizations alone. Social impact refers to “the generation of increased (or decreased) levels of social, cultural and human capital within the constituent communities in which an organization operates” (Onyx 2014, p. 12). Grand challenges require macro-approaches that may collide with particular interests, meaning that cooperation can turn competitive. Social impact is no longer an exclusive goal of community-based organizations: it is becoming mainstream as companies focus on broad social criteria rather than narrow metrics fundamentally related to shareholder value (Henderson and TempleWest 2019; Kanter 2011). What is distinctive of social organizations is the underlying spiritual significance that their impact assumes. The act of changing the world motivates a logic that transcends material gains, but such a logic is difficult to sustain over time, because of its dynamic paradoxical nature. At the heart of a transcendent logic of impact rests the notion of going beyond what is immediately possible with realism, or frustration will ensue. The consistent production of social impact may sometimes imply diminishing social impact. Imagine a social enterprise offering paid employment to homeless people. Such employment contracts involve additional costs because homeless people require more social support, supervising, and training, and tend to be less productive. To pursue its purpose, the social enterprise may need to adopt flexible/contingent employment practices that, while reducing costs, also reduce the social impact and partially jeopardize the pursuit of purpose. As Teasdale (2012, p. 524) has found, “some social enterprises have to adapt to employment conditions in the field within which they operate to survive. This may run counter to the social goals of the organization.

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However, other things being equal, not doing so could threaten organizational survival.” The paradoxes triggered by social organizations are not isolated from one another: they are nested in other paradoxes, as illustrated in Fig. 6.1. The message of the chapter can thus be summarized as follows: social organizations are attractive exemplars for the study of spirituality and its paradoxes, because of the spiritual dimension of their activity. Yet this spiritual reach is replete with paradoxical tensions. As such, the management of spirituality-oriented social enterprises implies a heightened sensitivity to paradox and the many responses it elicits (Berti et al. 2021). To make things more complicated, because of their nested and/or overlapping nature, tackling one paradox may activate another, which means that managing social organizations implies the tackling of spiritual dimensions with paradoxical features.

Practical Implications Spiritual development at work, understood as the design and management of organizations that provide a sense of transcendence and meaning through work, is difficult to obtain and sustain. Given the established tradition of designing structures around hierarchies of command and control, spirituality has historically not been a managerial priority. These structures and hierarchies confront managers with many challenges. If steered by servant leaders, social organizations are potentially richer in terms of this expression, given their inclination to serve along with a less hierarchical and more egalitarian ethos (Eva et al. 2018). But such an egalitarian ethos raises tensions. We discuss two that stand out. First, there is a challenge of balance and integration. At the heart of the spiritually rich organization there are tensions and paradoxes as discussed above, and tackling them implies continued balance and integration but also friction and conflict (Smith and Cunha 2020). Spirituality raises tensions that must be addressed in a realistic way. Excessive idealism is debilitating (Ashforth and Reingen 2014). Second, as organizations design themselves as communities of work united by a purpose (Cunha et al. 2017; Cunha et al. 2014), they empower employees. This may stimulate people to become activists in the defense of their organizationallysupported causes. Workers thus may raise what can be perceived as “a new threat” (Edgecliffe-Johnson 2019, p. 9). Activist workers hold organizations accountable by forcing them to express consistency between values and actions. By promoting the practices discussed here, organizations are voluntarily or involuntarily empowering workers to take a stand and to operate in a regime of engagement that is not compatible with expectations of docility (Clegg et al. 2006). It is thus important that they embrace spiritual challenges with the notion that any organization built over a spiritual mission is shifting away from the command-and-control structures of the past. The tensions thus introduced are part of a paradoxical journey that is rich in tension and discomfort.

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Overall, the purpose of this chapter was to use the lens of paradox to explore spirituality in the social enterprise. Social enterprises of various organizational types endeavor to integrate sociality, innovation, and market orientation (Nicholls and Cho 2006) in order to deliver social value to clients and beneficiaries. This can turn them into benchmarks for the study of work as a source of spiritual meaning. This discussion is relevant to other organizational forms: as business firms express increasing alertness to the relevance of the social and spiritual dimensions of organizing, they may find inspiration in social enterprises. Social enterprises are increasingly aware of the need to adopt rigorous management approaches. The willingness of corporations to learn from approaches employed by social organizations was initially raised by Drucker (1990) and further developed by Porter and Kramer (2011). Because of their nature, namely their attention to the spiritual, they are suitable to guide us through a comprehensive exploration of workplace spirituality as a paradoxical endeavor. This discussion offers three main contributions to the literature. First, it explicitly problematizes the role of spirituality in social enterprises. One reason why many people feel attracted to these organizations is precisely because they are expected to offer opportunities for spiritual expression. Yet this expectation must be considered with care. The need to carefully consider the spiritual dimension is associated with a second contribution made here: the paradoxical nature of the social organization. Because of the centrality of mission and the need to balance logics, these organizations may be vulnerable to mission drift, lose their spiritual appeal, and confront individuals with a tension between logics that may be hard to manage (Cunha et al. 2019c). Third, we suggest that social enterprises, because of their characteristic hybridity, offer a preferential setting for the study of paradox (Smith and Cunha 2020). We also open possible lines for future research. Because of the paradoxical nature of mission-driven organizations, they open possibilities to explore how wellintended leaders may become dogmatic do-gooders. Hubristic leadership may not always be the result of greed but also of a genuine conviction in one’s superior beliefs. This may also help to understand how utopias may degenerate into dystopias (Clegg et al. 2012) and why criminal outfits such as death squads may justify their criminal operations on the basis of spiritual-moral grounds (Breuil and Rozema 2009). Finally, again considering a paradox lens and mirroring the previous point, scholars may explore how sometimes doing what is morally right and transcending the ordinary may involve going against the norms. Wiedemann, Clegg and Cunha’s (Wiedemann et al. 2021) study of the 1914 Christmas Truce offers an example of how the spiritual meaning of Christmas led battlefield enemies to violate the law and engage in fraternization in an extraordinary episode of bottom-up humanistic management against institutionalized barbarity. This also suggests that mobilizing social movements to fight corruption and injustice may require a spiritual lever that deserves to be further studied (Lee et al. 2018). As Fotaki et al. (2020) have pointed out, a spiritual space may help to expand our collective imagination to address important social problems.

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Conclusion Social enterprises are sometimes idealized as examples of the spiritually rich workplace. However, a more balanced view may be adopted. First, the spiritual journey is open to other organizations, and those organizations may learn from the way social enterprises face and handle paradoxes at the spiritual level. Second, the spiritual foundations of social enterprises provide no protection against dysfunction (e.g., they may express total institutional inclinations, use positive words to cover up negative practices, or breed dogmatic and hubristic leaders). As demonstrated above, the journey towards a more spiritual social enterprise is comprised of tensions that accompany the transition occurring at each form of social enterprise (Guillén et al. 2015). In ethical terms this raises two key questions. The first is the fundamental ethical concern associated with encouraging and nurturing spirituality in the workplace within the context of social enterprises. Should social enterprises nurture a more spiritual approach to their activities and practices? Our work fundamentally shows that the concern for the wholeness of the human being which is typical of social enterprises (Sheep 2006) appears to have a strong ethical foundation. Thus, ethical considerations are at the heart of understanding the nest of paradoxes associated with workplace spirituality. Second, our work also raises questions related to ethical approaches of managing the spiritual journey at each organizational form. Although the core of our work focuses on the paradoxical tensions that this journey encompasses, we acknowledge that decisions on how to manage these carry ethical implications (Zahra et al. 2009). We believe our implicit contribution to the ethical dimensions associated with the latter deserves further investigation. Overall, our work suggests that social enterprises can teach other organizational forms how to design work that transcends daily occupational meaninglessness. In the social organization individuals may find opportunities for thriving and meaning (Spreitzer et al. 2005), but the path to spiritual purpose is riddled with tension and contradiction. Paradoxical tensions and contradictions render the commitment to a higher spiritual order a difficult exercise in paradox. Navigating the tensions between social and business missions, in search of synergy, is a task that is easier said than done – and also one that can turn great intentions into not so good organizations. Acknowledgements We thank our editors for their valuable comments and suggestions. This work was funded by Fundação para a Ciência e a Tecnologia (UID/ECO/00124/2013, UID/ECO/ 00124/2019, UID/GES/00731/2019, UID/GES/00315/2019 and Social Sciences DataLab, LISBOA-01-0145-FEDER-022209), POR Lisboa (LISBOA-01-0145-FEDER-007722, LISBOA-010145-FEDER-022209) and POR Norte (LISBOA-01-0145-FEDER-022209).

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Miguel Pina e Cunha is the Fundação Amélia de Mello Professor of Leadership at Nova School of Business and Economics, Universidade Nova de Lisboa. His work deals mainly with organizing as process and paradox. He recently published in the Academy of Management Review, Journal of Management, Organization Studies, Research in the Sociology of Organizations, and Strategic Organization and co-authored Positive Organizational Behaviour (Routledge, 2020) and Elgar Introduction to Organizational Paradox Theory (Edward Elgar, 2021). Miguel Alves Martins is the Executive Director of the Leadership for Impact Center and is also Assistant Professor Adjunct at Nova School Business and Economics, Universidade Nova de Lisboa, Portugal. He teaches Applied Social Entrepreneurship and Performance and Progress. His research interests focus on social entrepreneurship and intrapreneurship, impact business models, and hybrid organizations.

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Arménio Rego is Professor at Católica-Porto Business School, Portugal. He has published in journals such as Human Relations, Journal of Business Ethics, Journal of Business Research, Journal of Management, and The Leadership Quarterly, among others. His research examines positive organizational behavior. He is the lead author of The Virtues of Leadership: Contemporary Challenge for Global Managers (Oxford University Press, 2012). His main research focuses on virtues in leadership, organizational virtuousness, and individual performance and well-being. Ricardo Zózimo is assistant professor of management at Nova School of Business and Economics, Universidade Nova de Lisboa, Lisbon, Portugal. His research focuses on understanding how entrepreneurs learn and how the social dimensions of learning contribute to personal and firm development. He has published in outlets such as Journal of Business Ethics and Entrepreneurship and Regional Development. His most recent research project approaches gratitude from a spiritual perspective by evaluating the distinctive ways entrepreneurs can say thank you to individuals who have supported them.

Chapter 7

A Holistic Perspective on Social Performance in Social Enterprises: Disentangling Social Impact from Operational Sustainability Christina Hertel, Sophie Bacq, and G. T. Lumpkin

Abstract Drawing on the existing literature, we differentiate between social impact, operational sustainability, and—as an aggregate concept—social performance, and provide a holistic perspective on the performance of social enterprises. We review why measuring social performance is important and for whom—the organization itself and its stakeholders—as well as the challenges and obstacles involved in social performance measurement. We propose civic wealth, a variable that captures the social, economic, and communal endowments generated by social enterprises and the communities where they are located, as an appropriate performance-based dependent variable in social entrepreneurship. Civic wealth addresses the challenge of capturing organizational effects at an extra-organizational—civic—level of analysis. Keywords Social enterprises · Social impact · Operational sustainability

C. Hertel École Polytechnique Fédérale de Lausanne, College of Management and Technology, St. Sulpice, Switzerland e-mail: christina.hertel@epfl.ch S. Bacq (*) Department of Management & Entrepreneurship, Kelley School of Business, Indiana University, Bloomington, IN, USA e-mail: [email protected] G. T. Lumpkin Tom Love Division of Entrepreneurship & Economic Development, Price College of Business, University of Oklahoma, Norman, OK, USA e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_7

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Introduction Social performance and social impact have become buzzwords in the public debate and the academic literature on public policy, non-profit organizations, corporations, and entrepreneurial ventures (Ebrahim and Rangan 2014; Gugerty and Karlan 2018; Stephan et al. 2016). There is a growing consensus that measuring and reporting impact is important not only for organizations, but also for a range of stakeholders (Arvidson and Lyon 2014; Nicholls 2018; Ormiston 2019). As a result, hundreds of measurement approaches and tools have been developed over the past two decades.1 Social enterprises are bottom line organizations that seek to address societal problems through business ventures, thus having a dual nature, social and commercial. As social enterprises’ raison d’être is the pursuit of a social mission (Bacq and Janssen 2011; Santos 2012)—e.g., providing employment opportunities to marginalized, long-term unemployed individuals (Pache and Santos 2013), reducing poverty among disadvantaged farmers and women (Alvord et al. 2004), or providing debt and equity capital to social initiatives (Hehenberger et al. 2019)—social impact is arguably the most relevant performance-based dependent variable in social entrepreneurship (Lumpkin et al. 2011; Rawhouser et al. 2019). However, despite its indisputable importance and immense efforts invested in developing and establishing measurement approaches (Mulgan 2010), practitioners and researchers alike lament the lack of agreement on measurement approaches and standards: Practitioners have called the pursuit of social impact measurement confusing and quixotic (Adams et al. 2017; McCreless and Trelstad 2012), and a recent review on social impact measurement in the management literature concludes that measurement standards are theoretically and empirically underdeveloped (Rawhouser et al. 2019). A major impediment to standardized approaches is the elusive nature of the concepts and the resulting proliferation of terms including social impact (e.g., Rawhouser et al. 2019; Stephan et al. 2016), social value (Di Domenico et al. 2010; Goh et al. 2016; Hall et al. 2015; Kroeger and Weber 2014), public value (Meynhardt 2009; Stoker 2006), social performance (Agle and Kelley 2001; Boulouta 2013; Chen and Delmas 2011), social returns (Emerson 2003; Siemens 2016) and social output (Husted and De Jesus Salazar 2006; Pease 2016). Such multiplicity has fueled the proliferation of concept operationalizations by practitioners and scholars.2 Thus, the questions of what suitable performance-based dependent variables are in social entrepreneurship research, and how they can be operationalized, remain unanswered.

See Ebrahim (2019) and the Social Venture Technology Group’s (2008) “Catalog of Approaches to Impact Measurement” for an overview. 2 See Rawhouser et al. (2019) for an overview of conceptualizations and operationalizations in management research. 1

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Social entrepreneurship is only one of the domains in which social performance and social impact measurement are extensively discussed. There is a large body of relevant knowledge in the literatures on non-profit organizations and development agencies (see Ebrahim (2019) for a comprehensive overview of measurement systems in the social sector) and in the broader management literature focusing on Corporate Social Responsibility (CSR) or Corporate Social Performance (CSP) in profit-driven organizations (see De Bakker et al. (2005) for a review). A common understanding of the key concepts is central for moving forward the discussion on social performance in the context of social entrepreneurship. Based on our analysis of insights and practices in these literatures, we provide a holistic perspective of social performance measurement considering the outputs, outcomes, and impacts—intended and unintended, positive and negative, direct and indirect—an enterprise’s activities have on its stakeholders: organizational and extra-organizational actors, society, and the planet.3 This holistic view of social performance reveals a difference between an outward-looking approach versus an inward-looking approach to social performance translating into a differentiation between social impact (i.e., the net effects of interventions, products and/or services on target beneficiaries, society and the planet), and operational sustainability (i.e., the extent to which the inputs and activities are in line with common environmental, social, and governance (ESG) standards), which can be aggregated in the concept of social performance (section “Social performance as an aggregate of social responsibility and social impact”). This differentiation bears an important nuance for social performance measurement in social enterprises. Whereas standardized approaches to evaluate a social enterprise’s operational sustainability are possible and desirable (e.g., meeting ESG standards), measuring social impact requires more flexible, casespecific measurement approaches (e.g., health improvements in a community will vary depending on initial conditions). While there is nearly universal agreement that social impact and social performance measurement is important but challenging, the reasons for both the importance and the challenges are often taken for granted without further specification. We review the literature to shed more light on the potential benefits for various stakeholders (section “Why should we measure social performance after all?”) as well as on the challenges and risks related to social performance measurement (section “Why is it so difficult?”) in order to enable social entrepreneurs and social entrepreneurship scholars to make informed decisions about what and how to measure. In line with recent calls for more flexible reporting formats considering organizations’ needs and constraints (Arvidson and Lyon 2014; Ebrahim 2019; Gugerty and Karlan 2018; Nicholls 2010, 2018), we stress that organizations are agents who should flexibly—yet transparently and justifiably—choose why to measure, what to measure, how to measure it, and what and how to report it. Combining the insights gained in the preceding sections, we offer guidelines that can help social

3

By explicitly listing the planet as a stakeholder, we highlight that the environmental perspective is inherently included in the notion of social performance.

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entrepreneurs and social entrepreneurship scholars develop a social performance measurement strategy that meets their specific needs (section “A Holistic guide of social performance measurement”). Finally, management scholars have noted the difficulty of capturing outwardlooking impact at the extra-organizational level of analysis (e.g., system or ecosystem level of analysis) because it tends to be overly broad and too abstract, especially in a field where the organizational level of analysis is the prime focus. A civic level of analysis—that is, in neighborhoods, villages, and communities that are the focus of so many social enterprises and initiatives (Lumpkin et al. 2018)—has been set forth to address this challenge and attenuate issues of breadth and vagueness (Lumpkin and Bacq 2019). To illustrate how to address extra-organizational phenomena, we suggest that civic wealth—a construct that captures the social, economic, and communal endowments generated by social enterprises and the communities where they are located (Lumpkin and Bacq 2019)—is a relevant performancebased dependent variable for social entrepreneurship research, and propose a set of indicators and metrics that might be used to evaluate civic wealth (section “Measuring societal-level change: the civic wealth example”).

Social Performance as an Aggregate of Social Responsibility and Social Impact As we have mentioned before, management scholars have used a wide variety of different concepts to describe and measure the effects of social enterprises, and all of these concepts mean different things to different people (Rawhouser et al. 2019). As with social entrepreneurship itself, it has so far proven impossible to agree on one or a set of relevant dependent variable(s) of social entrepreneurship—let alone their definition or conceptualization. Yet, to allow for a meaningful discussion, developing a common understanding of the core concepts is a critical step. Bringing together insights from the social sector and management literatures, we suggest to differentiate between social impact, operational sustainability, and—as an aggregate concept—social performance, and provide a holistic perspective on the social performance of social enterprises.

Social Impact: An Effectiveness Concept With regard to social sector organizations and development programs, practitioners and scholars have mainly been interested in the effectiveness of interventions, that is, the organizations’ or programs’ ability to translate their social mission into practice (Ebrahim 2019). Most social entrepreneurship scholars—and impact investors alike—have followed this approach by focusing on the social impact social

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enterprises create for their targeted beneficiaries. Yet, judgements about what classifies as social impact are inherently subjective and normative (Morris et al. 2020; Santos 2012), making those concepts malleable and difficult to define (Arvidson and Lyon 2014; Mulgan 2010). Nevertheless, many scholars have attempted to provide definitions. Kroeger and Weber (2014) view impact in terms of social value, which they define as the reduction of a treatment group’s relative social need through an intervention. Their definition thus explicitly focuses on positive intended effects on the targeted beneficiaries. Others adopt a broader perspective by noting that the beneficial outcomes can not only be enjoyed by the intended targeted beneficiaries, but also “by the broader community of individuals, organizations, and/or environments” (Rawhouser et al. 2019, p. 83). Nicholls (2018), in turn, only considers the effects on targeted beneficiaries, but highlights that these can be both positive and negative. These are only three of many examples illustrating the different nuances in defining social impact. Overall, in the field of social entrepreneurship, we see a clear focus on impact as intended, positive effects on a target audience (Rawhouser et al. 2019). In the social entrepreneurship literature, examples of social impact metrics include the percentage of beneficiaries who found a permanent job with the help of work integration social enterprises (Battilana et al. 2015), poverty reduction rate in the Rwandan coffee sector (Tobias et al. 2013), the amount of microfinance funding provided by BRAC to empower entrepreneurs (Salvado 2011), and others. A measurement approach that has become increasingly used to measure the impact of social enterprises is the Social Return on Investment (SROI), which calculates the ratio of the costs relative to the monetized benefits generated by an organization on different stakeholders (Hall et al. 2015). In the social sector literature, the logic model4 connecting activities and the required inputs with its outputs, outcomes, and impacts has become a standard tool for evaluations, and has started to receive attention from the entrepreneurship and management literature (e.g., Andersson and Ford 2015; Molecke and Pinkse 2017; Wry and Haugh 2018). The logic model has proven to be useful for providing conceptual clarity and for identifying the relevant indicators along a causal path (Ebrahim and Rangan 2014). While inputs are the resources used to enable the activities of the organizations, such as human, financial or natural capital, activities comprise the processes, tools, events and/or actions that are carried out in an organization. Outputs can then be defined as the immediate results of an organization’s activities, outcomes describe the long- and mid-term changes in people’s lives—be it changes in knowledge, attitudes, behaviors or conditions, and impacts are the long- and mid-term community-level or society-level results (Ebrahim and Rangan 2014). Applying this logic to the existing literature, most studies that claim to measure “impact” actually seem to be measuring outcomes or even outputs, which

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For an illustration of the logic model, please refer to Ebrahim and Rangan (2014, p. 121). These authors also explain the link between logic model and theory of change, which we discuss in section “A holistic guide of social performance measurement”.

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are easier to grasp as short term effects. From the 71 papers included in the recent review on impact measurement in social entrepreneurship by Rawhouser et al. (2019), we could not find a single one that actually measures impact. However, the wary and extensive use of the term “impact” is hampering meaningful discussions and impeding comparability (Adams et al. 2017; Gugerty and Karlan 2018). As such, using the language of the logic model—outputs, outcomes, and impacts—could bring more clarity into the discussion about performance-based dependent variables in social entrepreneurship research. In contrast, recent developments in the impact evaluation literature indicate an emerging convergence on the definition of impact as “changes brought about by actions or effects produced by an intervention” (Ebrahim 2019, p. 15), independent of the short- or long-term effects of the changes. For the sake of simplicity for the reader, in the rest of this chapter, we use the term effects as an umbrella term anchored in causality and that comprises outputs, outcomes, and impact. However, although entrepreneurs and practitioners have thus far focused mainly on intended, positive effects on target beneficiaries, a holistic understanding of the value of an intervention, product or service requires taking into account the sum of all effects—positive and negative, intended and unintended, direct and indirect—on target beneficiaries, society at large, and the planet.

Operational Sustainability: An ESG Concept Social impact, as described above, is the sole focus of most measurement initiatives in social entrepreneurship. In contrast to this focus on the effects of interventions, products and/or services on targeted beneficiaries, the literature on profit-driven organizations mainly looks at the extent to which an organization’s operational activities are in line with ESG (Environment, Society, Governance) standards (e.g., Kang 2013; Oikonomou et al. 2014). Each of these operational activities carried out in a social enterprise has effects—positive and negative, intended and not intended—but the effects created through a social enterprise’s economic operations on all its stakeholders have thus far, with few exceptions (e.g., Cornelius et al. 2008), been neglected in the social entrepreneurship literature. Take, for example, a UK-based social enterprise that is successful in reducing poverty among women in rural India. If the enterprise manages to provide hundreds of women access to higher education every year, everyone would probably agree that it classifies as positive social impact. But what if the program requires multiple long-distance flights between the UK and India every month? What if, the enterprise mainly relies on the work of poorly paid interns and freelancers while the founders pay themselves a large multiple of what the employees receive? What if the enterprise would not support training activities for its own employees? What if the business would not offer flexible for plans for employees with kids? In other words, what is the overall effect when considered holistically?

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While we do not want to downplay the importance of understanding social enterprises’ effectiveness in achieving their core mission towards its target audience, comprehensive social enterprise performance assessments also need to capture their overall effect on their intra- and extra-organizational stakeholders, beyond solely targeted beneficiaries. Stephan et al. (2016) criticize the inward-looking perspective adopted in most for-profit management studies that only focus well-being within the organizational boundaries. Instead, they call for an outward-looking perspective of what they call “positive social change”. In the same vein, social entrepreneurship practitioners and scholars should not only focus on the effectiveness of generating change for intended targeted beneficiaries, but also on the social and environmental responsibility of a social enterprise’s business activities. Solely focusing on a social enterprise’s impact on beneficiaries means to consciously turn a blind eye to its—potentially negative and unintended—effects on intra-organizational stakeholders such as employees and funders, and other extra-organizational stakeholders such as customers, suppliers, local communities, but also society at large and the planet. To do so runs the risk of ignoring connections that may exist between what happens inside the organization and its outcomes. Indeed, recent research in the nonprofit management literature finds that the interaction between front-line staff and the clients of services has a bearing on certain kinds of outcomes (Benjamin 2012, 2018). We refer to this inward-looking performance as the operational sustainability of social enterprises. Commonly used evaluation frameworks developed for larger corporations, such as the KLD (Kinder, Lydenberg, Domini, now MSCI, Morgan Stanley Capital International; see Parks 2020, for a recent review), might provide inspiration for such evaluation, but are not necessarily applicable to social enterprises. In contrast, B Lab’s B Impact Assessment5 is a tool that can help social enterprises evaluate their social responsibility and, with the more recently developed add-on from B Lab—the SDG Action Manager—social entrepreneurs can now also assess such responsibility in line with the Sustainable Development Goals (SDGs).6 The Sustainability Code7 developed by the German Council for Sustainable Development and the Economy for the Common Good8 matrix are other examples of frameworks that can be used to evaluate the operational sustainability of social enterprises.

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https://bimpactassessment.net https://bcorporation.net/welcome-sdg-action-manager. B Lab’s impact measurement tools follow earlier impact assessment attempts, including the SAI 8000 standards for labor, the ISO 14000 standards for environmental processes, and the AccountAbility (AA1000) standards developed in the 1990s. Among the earliest ones were the Global Sullivan Principles, and later the UN Global Compact and Global Reporting Initiative. 7 https://www.nachhaltigkeitsrat.de/en/projects/the-sustainability-code/ 8 https://www.ecogood.org/en/ 6

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Fig. 7.1 A holistic perspective on social performance

A Holistic Perspective of Social Performance The “impact-lens” adopted by most practitioners and scholars, therefore, captures only a small part of all the aspects that flow into a social enterprise’s social performance—a part that is outward-looking, and biased towards the intended, the positive, and the targeted. In contrast, social performance is an aggregation of outputs, outcomes, and impacts created by all activities of an enterprise on intraorganizational and extra-organizational stakeholders, as well as on society at large and the planet. Put differently, the social performance of a social enterprise is an aggregate measure of (1) its social impact, that is, its intended positive effects on targeted beneficiaries, and (2) its operational sustainability, that is, the extent to which the inputs and activities are in line with common ESG standards (Fig. 7.1). Importantly, such a holistic perspective on social performance does not imply that, from now on, every social enterprise and social entrepreneurship scholar should aim to precisely measure every aspect of social performance. As we discuss later, social entrepreneurs should flexibly—yet transparently and justifiably—choose what to measure and how to measure it based on its specific demands and contingencies (Ebrahim 2019; Gugerty and Karlan 2018; Nicholls 2010, 2018). Moreover, it is impossible to report overall social performance using one aggregate indicator. Social impact is measured in absolute numbers and can be expressed in different units such as poverty indicators that measure the percentage decrease in overall poverty, or the value created through these percentage drops measured with monetary indicators.

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Frameworks for evaluating operational sustainability usually work with a point system and results are expressed in relative numbers (e.g., the B Impact Assessment tool yields a score that is relative to a total of 200 points). Hence, accounting for the overall social performance of social enterprises involves an overview of various measures as in the case of the balanced scorecard in conventional accounting (Kaplan and Norton 1992), which is a holistic semi-structured report that helps managers monitor the consequences arising from their organization’s actions.

Why Should We Measure Social Performance After All? Almost everyone seems to agree that, although measuring social performance is challenging, it is important and serves a vital purpose. Accountability towards funders and the possibility to learn and improve are by far the two most frequently mentioned reasons for social performance measurement. In the following, we provide an overview of other reasons, including legal requirements to disclose social performance, as well as social performance measurement benefits for social enterprises and their multiple stakeholders, including employees, targeted beneficiaries, local communities, partners, society at large and the planet. Doing so, we help social entrepreneurs and scholars make an informed decision about what and how to measure, thereby more fully harnessing the potential of social performance measurement. In many countries, the disclosure of non-financial performance—mainly related to social performance—has become a legal requirement for businesses (usually above a certain size) and, more recently, also for investors. Particularly in the aftermath of the financial crisis in 2008, governments around the world have become increasingly aware of the business community’s responsibility for achieving a sustainable future, and are developing frameworks and standards to foster sustainable business action. From a governmental perspective, social performance measurement and disclosure regulations have primary functions around setting minimum standards and fostering the creation of publicly available databases that serve as guidance for organizations and allow comparability (Nicholls 2010). In the EU, for instance, rules on non-financial disclosure require large companies “to disclose certain information on the way they operate and manage social and environmental challenges” (European Commission 2014). In 2019, the European Parliament passed a law to promote the better disclosure on the integration of ESG standards into investors’ decision-making and investment advice in the financial market (European Commission 2020). Further, many national governments such as Germany and France have issued their own disclosure regulations. However, the benefits of such endeavors remain contested: the US Congress has recently rejected European-style ESG reporting standards arguing that such standards would “only name and shame companies,” “waste precious company resources,” and do “more harm than good” (Financial Times 2019).

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Besides these general reporting standards for large corporations, social performance disclosure is an inherent element of the new legal forms that have been established in many countries to better cater to the needs of social enterprises (e.g., the Community Interest Company in the UK, social solidarity co-operative in Italy, and now the Benefit Corporation in the United States) (Nicholls 2010). In a similar vein, charities and other non-profit organizations are increasingly required to operate under governmental auditing regimes (Arvidson and Lyon 2014). Taken together, legal regulations are an important facilitator of the social performance measurement trend. Yet, for many organizations—particularly social enterprises—ensuring a minimal level of compliance is only a secondary motivator. The most extensively discussed motivation for measuring and reporting social performance is its importance for gaining access to resources from foundations, governmental programs and private investors, all of which want to ensure that their donations and investments are used in the best way possible (Arvidson et al. 2013; Phillips and Johnson 2021). Operational sustainability and social impact are becoming increasingly important dimensions in investors’ decision-making (Chiappini 2017). While operational sustainability has, at least to a certain extent, become an integral element of the decision-making of many conventional investors (e.g., socially responsible investments or ESG investments), impact investors and venture philanthropists often base their decisions on accounts of social impact. Although demands and required thresholds differ widely between these types of investments, a minimum level of social performance measurement and reporting has become legally required for a large set of organizations—including multinationals, charities, social enterprises, and others—to attract new investors and account for the achieved impact once funding has been received (Pan 2018). Since many social enterprises cannot attain the same return and growth rates as their profit-driven counterparts (Morris et al. 2020), they often have to compete for funding from impact-focused sources (e.g., impact investors, venture philanthropy funds or governmental support schemes) for which social impact is among the core dimensions for decision-making (Abt 2018). As a result, social entrepreneurs who cannot account for prospective impact in the future, or actual impact in the past, face greater difficulties in raising the required resources for their endeavors (Molecke and Pinkse 2017). Social performance measurement can also be a valuable exercise to raise awareness about the negative effects their operations have on society and the planet (Lingane and Olsen 2004; Mulgan 2010). Studies show that social performance measurement can trigger discussions and negotiations around operational sustainability (Lyon and Arvidson 2011; Nason et al. 2018) and that, over time, many organizations appreciate the value of this process (Arvidson and Lyon 2014). Ideally, the results obtained from the measurement process lead to learnings that are used to inform strategy and operations (Hall et al. 2015; Nicholls 2018; Ormiston 2019). Social performance measurement allows social entrepreneurs to understand the effectiveness of their approaches, identify and tackle weak spots, and invest in those products and services with the greatest effects (Ebrahim 2019). Yet, despite these valuable possibilities for improvements, a recent study of non-profits shows that, in terms of motivations for measuring, internal learning and improvement

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remain less important than external accountability (Lyon and Arvidson 2011). If social enterprises are not open to learn from social performance measurement and not willing to implement results into their enterprises, the potential for improvements remains unrealized. Organizations have also found that social performance measurements can be useful as a tool for communicating with employees. On the one hand, it can help “boost the morale” of employees and encourage performance; on the other hand, it also allows control of employees’ behaviors (Arvidson and Lyon 2014; Lyon and Arvidson 2011). Similarly, social performance measurement and reporting can be a tool for impression management (Teasdale 2010). By strategically reporting on their social performance, they can influence external audiences’ perceptions about their organizations. For social enterprises, it is not only a way to communicate their social mission (Ramus and Vaccaro 2017), but also to gain legitimacy (Ebrahim 2019) and demonstrate professionalism (Arvidson et al. 2013). As such, social entrepreneurs can use social performance reports to actively shape their environment and influence stakeholders (Lyon and Arvidson 2011), manage stakeholder expectations (Nason et al. 2018), and protect their enterprises from outside control (Arvidson and Lyon 2014). From an employee perspective, it gives employees the chance to choose their employers based on social performance dimensions and/or to exert power on changing the organization (Judge and Bretz 1992; The Guardian 2015; Wang et al. 2016). By involving stakeholders such as local communities in participatory processes, social performance measurement becomes an empowerment tool that gives non-funding stakeholders a say (Nicholls 2018). While targeted beneficiaries of social enterprises may benefit more from social impact measurement—as realizing underperformance may drive social entrepreneurs to improve the services rendered to beneficiaries—local communities can benefit more from operational sustainability reporting. Identifying weaknesses in that domain could lead an enterprise to reduce its negative effects on the local community, start new programs for the community (e.g., coupons, special events), or establish new corporate community volunteering programs for its employees, which eventually enhance the local community. Tackling social and environmental problems often requires collective action by several actors who join their forces, for example, in a cross-sector partnership (Branzei et al. 2018; Doh et al. 2019). Impact measurement is crucial to evaluate the effectiveness of the collective endeavor (van Tulder et al. 2015), but also to isolate the effects of different partners (Ebrahim 2019; Lingane and Olsen 2004).

Why Is It So Difficult? We have yet to find a social impact study that does not lament the lack of measurement standards and the challenges related with social performance measurement. But what is it that makes measuring social performance so challenging? By providing an

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overview of the challenges discussed in the literature, we aim to aid social entrepreneurs and scholars to identify potential difficulties early on in the process, and to adapt measurement goals and strategies accordingly. First, a major general difficulty lies in the subjective and intangible nature of social performance, and thus, of the relevant metrics. Social performance metrics inevitably entail subjective value judgements about questions like “what counts as social?”, “who deserves social benefits most?”, and “what are the acceptable tradeoffs?” (Lingane and Olsen 2004; Morris et al. 2020; Santos 2012). Measurement means “to ascertain the size, amount, or degree of something”9 and thus social performance measurement entails attributing numeric values to intangible outcomes (Lingane and Olsen 2004). In most cases, aggregating and quantifying information that is often qualitative requires the use of proxies (Nicholls 2018) and becomes particularly challenging when it involves the monetization of social benefits created (Hall et al. 2015). Since measurement is an act of social construction (Ebrahim 2019) that depends on context, industry and relevant goals (Ruff and Olsen 2016), hundreds of measurement approaches, tools, and guides have been developed. This makes it difficult for social entrepreneurs to choose “the one” that meets their specific requirements (Mulgan 2010) and hampers comparability among results (Lyon and Arvidson 2011). Another major challenge relates to the temporal dimension of effects of social enterprise initiatives and their measurement (Arvidson et al. 2013). While operational sustainability can be evaluated in the present, and outputs can be measured immediately, outcomes and impacts only manifest themselves over time (Ebrahim and Rangan 2014), which creates several measurement issues. First, since measurements need to deliver meaningful assessments of performance here and now, not years into the future, many approaches are attempting to predict future performance based on currently available information rather than measuring it retrospectively (Brown 2019). Such upfront predictions inevitably involve uncertainty whether midand long-term benefits will actually be realized (Lingane and Olsen 2004). When it comes to monetization, measurement must make predictions about the benefits an intervention or entrepreneurial activity will bring many years in the future, relative to how much the implementation costs in the present. For predictions of financial performance indicators, traditional accounting uses discount rates to account for the fact that an investment in the present will be worth less in the future. In parallel, the monetization of social issues requires decisions about how much weight should be put to the interests of future generations in relation to present generations—which is inherently a moral judgement (Mulgan 2010). Operational sustainability evaluations involve an inward-looking perspective that is rather straightforward in terms of quantifying outcomes. When it comes to social impact, by contrast, social entrepreneurs are confronted with the profound problem of having to prove causality (Ebrahim 2019). Most social enterprises address complex and multifaceted problems that are tackled by a multitude of actors in

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different ways (Montgomery et al. 2012). Hence, very often, it is difficult—if not impossible—to prove if, or how much, of an observed change can be reliably attributed to the action of one specific enterprise (Arvidson et al. 2013). When social enterprises collaborate with others, isolating their respective impacts becomes especially challenging, if not impossible (Ebrahim 2019). The quality and consistency of the methods is decisive for the social enterprises and all stakeholders (Lingane and Olsen 2004) and, according to the Global Impact Investing Network (GIIN), unsophisticated methods are one of the biggest constraints of impact measurement and impact investing (Adams et al. 2017). Yet, reliably proving causality requires complex methods, optimally involving quasi-experimental designs or randomized control trials (RCTs) with a control group (Abt 2018). Overall, any form of social performance measurement requires expertise and skills within a social enterprise (Arvidson et al. 2013), and organizations vary with regard to the capabilities they have at their disposal to implement measurement systems (Hall et al. 2015). It is important to stress that expertise is not only necessary to design and implement measurement systems, but also to analyze the data and interpret the results; if data is misread, an evaluation can become effectively worthless (Reynolds et al. 2018). Whereas measurement tasks in public sector entities can be more easily assigned to staff with a social science background and knowledge, most social entrepreneurs lack the expertise to design and implement sound measurement systems (Ebrahim 2019). In addition, social performance measurement is typically time consuming and costly. Studies have shown that an evaluation based on the SROI methodology, one of the cost-effectiveness comparison methods, can cost between £4000 and several hundreds of thousands of pounds (Arvidson et al. 2010). RCTs are even more costly, with a median cost of USD 72,600 (Speich et al. 2019). While these high costs can be accommodated in larger organizations, they can keep social entrepreneurs from doing measurement at all—or from doing it well (Dichter et al. 2016). Thus, the choice of indicators and measurement approach is strongly influenced by resources—skills, expertise, time and money—available to carry out the evaluation. Implementing social measurement systems within social enterprises also requires openness and capacity for change within the organization (Hall et al. 2015). Research has shown the importance of ensuring that not only managers, but also employees, agree on the goals, indicators and metrics used (Lyon and Arvidson 2011). Results can be harnessed efficiently only if all organizational members are on board with the social performance measurement system. In fact, despite their potential usefulness for improving internal operations and making organizations more effective in achieving their social mission, an unwillingness to cooperate or a lack of understanding about the implications of measures, can lead to the neglect of social performance results in decision-making in many organizations (Mulgan 2010) and even to conflicts inside the social enterprise. The way entrepreneurs feel about and act in measurement processes is usually related to the power of outsiders or, more specifically, to the degree of power asymmetry within a measurement regime (Ebrahim 2002). Research has shown that, if employees—and also the social entrepreneurs themselves—feel that

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measurement is being imposed on their organizations from the outside—whether by funders, governments or other powerful stakeholders—they will react with resistance and dissatisfaction (Arvidson and Lyon 2014). Moreover, market-based evaluation tools and language from traditional, finance-focused accounting can lead to a feeling of marketization and deterioration of the social enterprise’s social mission (Eikenberry and Kluver 2004). Most employees of social enterprises feel strongly attached to the values and vision of the enterprise (Pan 2018) and thus, mission drift—even if only perceived—can make employees feel estranged from their own values. The disjuncture between managers enforcing external measurement demands and employees supporting the enterprise’s social mission can lead to severe identity threats in organizations (Schoenberger 2019). Finally, accountability to extraorganizational stakeholders may feel like a means of external control or even surveillance with the option of disciplining and limiting autonomy (Arvidson and Lyon 2014). Yet, research also shows that, if communicated transparently and developed collaboratively, initial resistance can be transformed into agreement and become an inherent element of a refined organizational culture (Arvidson and Lyon 2014). As we have discussed, social performance measurement not only informs internal decision-making and strategy, but it is also an important means to satisfy the demands of multiple stakeholders. Yet, different stakeholders have different demands, and meeting those demands, which are often conflicting, can be highly challenging (Ebrahim 2019; Nicholls 2010) and require multiple indicators and metrics (Kendall and Knapp 2000). Given their resource constraints, values and dependencies, social entrepreneurs must therefore develop systems that cater to the needs of the stakeholders they choose to prioritize and often measure different things in separate processes (Ebrahim 2019; Mulgan 2010). Such decisions can lead to tensions and upset relations with stakeholders (Lyon and Arvidson 2011). The possibility to report biased results and overclaim social performance—be it intentional or unintentional—might be the greatest issue for extra-organizational stakeholders. While in some organizations, social performance measurements are subject to scrutiny by external auditors, in many organizations, most parts of social performance measurement are based on internal decisions and self-evaluation. This room to maneuver gives organizations the chance to exert control (Lyon and Arvidson 2011) but also allows for strategic interpretations of results that may provide a distorted picture of an organization’s actual social performance (Ebrahim 2019). Unstandardized measurement approaches based on self-evaluation allow an organization to hide information, inflate its own achievements, take credit for more than it has actually achieved, and double count financial impact as social impact (Burger and Owens 2010; Lingane and Olsen 2004). The concern that other, competing organizations may inflate their results, may lead organizations to also overclaim (Lyon and Arvidson 2011). Such practices undermine the credibility of social performance measurement approaches (Arvidson et al. 2013) and fuel the already ubiquitous cynicism about social performance measurement as a powerful tool for greenwashing (Lingane and Olsen 2004).

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Finally, these challenges have implications for academic research on social enterprises’ social performance. While social impact might be difficult to compare across a large number of companies (Ruff and Olsen 2016),10 operational sustainability could be measured in a standardized manner, for instance using ESG-based reporting schemes for larger corporations as a model to build on. Yet, so far, the lack of standardized measurement approaches and of commonly accepted indicators and metrics have contributed to a general lack of social performance data for a large number of social enterprises. While the Kinder, Lydenberg, Domini (KLD) (now Morgan Stanley Capital International, or MSCI) data has been used by many researchers assessing social performance (roughly one fourth of papers studying performance-related activities and outcomes included in the review by Rawhouser et al. 2019), it is unavailable for most social enterprises. The recently launched SDG Action Manager by B Lab, focusing on enterprises’ operational sustainability, might be a valuable future data source, adding to data from the B Impact Assessment, a source used by management scholars (e.g., Gehman and Grimes 2017; Grimes et al. 2018). Scholars could also follow recent developments in impact investing, where there is growing convergence around the process standards developed by the Impact Management Project11 and the Operating Principles for Impact Management, developed by the International Finance Corporation.12 The creation of useful larger datasets will, however, also depends on social enterprises’ willingness to share their data (Gugerty and Karlan 2018). Shared databases may not be sufficient, however; in their recent review, Rawhouser et al. (2019) conclude that even studies that use the same databases and operationalize the outcome variable in the same way, often make use of the measures in a different manner. To date, the number of studies attempting to measure social performance of social enterprises published in top-tier journals is still limited. Developing sound measurement standards will require time but also needs a forum—for experimentation with new metrics, datasets and tools and discussion. Room for such experimentation should be given in top entrepreneurship and management journals.

A Holistic Guide of Social Performance Measurement Social performance measurements vary in focus—social impact versus operational sustainability versus a combination of both—and in comprehensiveness and complexity, ranging from the collection and analysis of data on operational sustainability

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and outputs, to comprehensive measurements of outcomes and impact based on sophisticated measures and complex data collection systems. Such measurements can be developed and carried out by organizations themselves but also by external consultants and auditing companies. While operational sustainability evaluations can be standardized to a certain extent, outcomes and impacts are highly specific to the enterprise and the (sub-)industry in which it operates (Khare and Joshi 2018). Organizations measure their social performance not only to inform their own strategy but also for reasons of accountability towards funders and as a tool to communicate with stakeholders. Yet, attempts to meet all these objectives with one standardized measurement system often result in situations in which organizations fail to do any of them well (Mulgan 2010). Impact has become a buzzword and social entrepreneurs feel pressured to account for long-term impacts at a societal level (Ebrahim 2019). Yet, this “more is better-mentality” can be misleading (Gugerty and Karlan 2018). Organizations have different needs on the one hand, and different capabilities and resources on the other hand (Ebrahim 2019). In line with this, several scholars have called for more flexible reporting formats where measurement depends on the objectives and constraints of enterprises (Arvidson and Lyon 2014; Ebrahim 2019; Gugerty and Karlan 2018; Nicholls 2010, 2018). By assuming control of the measurement process and making it part of the organizational strategy, organizations have the agency to shape the terms of measurement including why to measure, what to measure, how to measure, why measure it, and what and how to report it (Arvidson and Lyon 2014; Ebrahim 2019). However, these judgements must be made based on critical reflections (Nicholls 2009) which require a thorough understanding of potential benefits and challenges (Gugerty and Karlan 2018). While it may make sense for some organizations to invest in complex measurement systems focusing on long-term society-level results, basic measurements focusing on operational sustainability and short-term results may be sufficient for others (Lingane and Olsen 2004). Overall, our review of the literature reveals that these decisions depend on five factors, namely (1) the enterprise’s theory of change, (2) stakeholder expectations and prioritizations, (3) measurement issues, (4) the enterprise’s resource availability, and (5) existing capabilities and available systems within the enterprise. As each of these five factors might evolve over time, what might be an adequate measurement strategy today, might need adaptation 1 year later, thereby calling for a forward-looking stance toward social performance measurement in social enterprises. Figure 7.2 provides a non-exhaustive set of guiding questions that can help social entrepreneurs develop a social performance measurement strategy that meets their specific needs based on these five factors. First, the choice of indicators and metrics is underpinned by a social enterprise’s theory of change that specifies not only the social mission but also assumptions about how this mission is to be achieved (Arvidson et al. 2013; Bacq 2017) from which performance indicators and metrics can flow logically (Lingane and Olsen 2004). Importantly, social enterprises must choose whether they aim to assess social performance holistically (i.e., operational sustainability and social impact) or choose to focus on one of the elements. The logic model, breaking down results into outputs,

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1) Theory of change* • • •

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2) Stakeholder expectations* •

What are our goals? What do we want to achieve? Which performance perspective are we interested in(operational sustainability vs. social impact vs. holistic)? Which would be the relevant indicators and metrics for measuring what we want to measure?

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Who are the different stakeholder groups we are accountable to? What are the expectations of these groups? How do we prioritize the groups (and their demands)? What could be unintended side-effects of catering to the needs of one stakeholder group on another one?

Measurement system*

5) Capabilities and systems* Which capabilities and systems would be required? Which of them do we have already? How can we build up missing capabilities or systems? How can we acquire and use external capabilities and systems?

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3) Measurement Issues* For which of the desired outcomes/ impacts can we really claim causality? Are there ways of proving causality? Are there already established metrics and measurement approaches we could use? Can we think of potential new metrics and measurement approaches?

4) Resource availability* • • •

What resources (e.g., financial, human) are available now, the mid-term and in the long term? How could we use resources most efficiently, leverage synergies or raise additional resources? What are the opportunity costs from using resources for measurements?

* All changing over time

Fig. 7.2 A holistic guide of social performance measurement for social entrepreneurs

outcomes, and impacts, can be a useful additional tool for identifying relevant indicators and metrics (Ebrahim and Rangan 2014). Based on its mission, values and strategy, social enterprises can also decide if they want to focus only on measuring impact on targeted beneficiaries, or adopt a more holistic perspective that also considers the operational sustainability of all business activities. Second, decisions over what and how to measure are dependent on stakeholder expectations and the needs of those within and outside of the organization (Lyon and Arvidson 2011). This requires that social entrepreneurs first identify relevant stakeholder groups and their demands. The goal is not to be accountable to everyone for everything, but to prioritize among competing accountability demands and design measurement systems accordingly (Ebrahim 2019). Involving stakeholders in this process has proven to be an effective way of designing measurement systems that truly meet stakeholder demands (Hall et al. 2015; Twersky and Reichheld 2019). Third, social entrepreneurs need to focus on measurement issues meaning that they must navigate the extensive pool of existing measurement approaches and tools to identify those potentially suitable for their requirements, and/or come up with new metrics and measurement approaches. While identifying metrics for measuring outputs may be a straightforward exercise, choosing suitable indicators and metrics for outcomes and impact requires more careful analysis and judgements (Lyon and Arvidson 2011). Causality is an important and possibly necessary requirement that often reduces the list of potentially interesting indicators (Lingane and Olsen 2004). Yet, as discussed earlier, measuring societal-level impact might not always be the

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• • • •

Research Aim What is the aim of our research? What is (are) our specific research question(s)? Which performance perspective are we interested in? At what level of analysis do we want to measure social performance?

Research Design Research Context/Object • • •

Which organization(s) are we interested in? And why? Which of their outputs, outcomes and/or impacts are we interested in? Which would be the relevant indicators and metrics for measuring what we want to measure? Do these measures really measure what we are interested in?

Measurement Issues • • • • •

Are there existing measurement approaches we can apply (or adapt)? Can we think of potential new indicators and measurement approaches? What data would we need? Is the data already available? Or where/how can we collect the required data? Can we use our measures individually or do we need to develop composite measures?

Fig. 7.3 A social performance measurement guide for researchers

goal; lower-level measurements using internal data might fully suffice for some organizations (Reynolds et al. 2018). Choosing appropriate units of measurement constitutes another important step. Monetization, for example, enables complex information to be converted into data that can easily be compared and valued. Yet, it may be difficult or misleading to summarize all impacts into one number or currency, and some performance indicators simply cannot be meaningfully expressed in monetary terms (Lingane and Olsen 2004). Fourth, social entrepreneurs need to decide what indicators and measurement approaches are realistic and reasonable to measure based on their resource availability at that point in time and in the foreseeable future (Ebrahim 2019). Measuring social performance is a resource intensive process and thus has high opportunity costs (Mulgan 2010); social entrepreneurs should therefore ensure that the benefits outweigh the costs (Gugerty and Karlan 2018). Finally, measurement systems depend on the capabilities and systems that exist and are already in place (Ebrahim 2019). Inadequate capabilities can be built up internally over time or, depending on the available resources, be acquired from external sources. Taken together, these five steps help social entrepreneurs form a measurement system tailored to its specific needs and possibilities. These guidelines targeting social entrepreneurs can also serve as a basis for developing techniques and procedures for social entrepreneurship researchers interested in measuring the social performance of social enterprises. In this context, the appropriate research design depends on (1) the research aim, (2) measurement issues, and (3) the study context and/or object. Figure 7.3 provides an overview of these three factors and a non-exhaustive list of related questions scholars could ask while designing their studies.

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Measuring Societal-Level Change: The Civic Wealth Example In light of the social performance measurement challenges outlined above, we have called for a holistic perspective on measurement and reporting. As discussed, because the social performance of social enterprises potentially entails various benefits for multiple stakeholders, there are a wide variety of ways to frame and measure it. In this section, we focus on civic wealth as an exemplar of the multiple extra-organizational benefits that accrue to, and are created through the efforts of multiple stakeholders, including social enterprises. As such, we consider civic wealth to be an especially useful dependent variable for illustrating the effects of social entrepreneurship initiatives at the civic level. By linking measurement of effects to measurement of processes, the civic wealth creation (CWC) approach— the combinative generation of social, communal, and economic endowments that benefit local communities (Lumpkin and Bacq 2019)—illustrates a holistic perspective on societal-level change.

The Concept of Civic Wealth Lumpkin and Bacq define civic wealth as a “comprehensive indicator of the intellectual, affective, and material resources, capacities, and capabilities” of a community (2019, p. 386). Because the aim of most social entrepreneurship endeavors is to bring about changes in communities (Lumpkin et al. 2018), the term civic wealth creation was coined to capture the results of many types of social change initiatives. In this respect, the impetus for focusing on CWC initiatives was to parallel the broader United Nations (UN) Sustainable Development Goals, but at a civic level of analysis. We submit that civic wealth is well suited to understand the social performance of social entrepreneurship initiatives in a holistic manner. The novelty of the CWC approach manifests at three levels: • The civic level of analysis. Civic wealth is a comprehensive term intended to capture extra-organizational effects of social change initiatives (including social entrepreneurship) at a civic level of analysis. Examples of civic levels include a community, a region, a village, or a neighborhood where a group of people whose shared experience creates a common bond can generate a lot of social change (Lumpkin et al. 2018). Advantages of the term “civic level” as opposed to “societal level” is that it is more tangible (less abstract) and hints at collections of people in relation to a community or local area. The switch from an organizational to a civic level of analysis also implies considering a social enterprise as

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one of several actors of impact, in line with the new emphasis on systems change among leading organizations such as Ashoka.13 • The principle of stakeholder cooperation. For civic wealth to take shape, three main groups of stakeholders—community, enterprise, and regimes of support— coalesce around a social issue and come together to enact social change (Lumpkin and Bacq 2019). This perspective builds on insights from the principle of stakeholder cooperation (Freeman et al. 2010) and addresses “how community actors with common goals create civic wealth through the interaction of multiple stakeholders with diverse but joint interests” (Lumpkin and Bacq 2019, p. 384). Indeed, examples abound of social enterprises partnering with communities to co-design and co-create solutions which lead to better outcomes.14 As such, the CWC perspective considers that a social enterprise is only one among three key stakeholders who partake in the social change initiative. • The total wealth perspective. Civic wealth embraces a “total wealth” perspective that accounts for both the tangible dimensions (e.g., products, clients served, material gains) and intangible dimensions (e.g., health, happiness, social justice) of wealth creation (Zahra et al. 2009). Civic wealth considers the effects of a social entrepreneurship initiative as being a composite of social wealth (e.g., engaging the citizenry, developing capabilities, enhancing quality of life) and community wealth (e.g., enriching culture, building local capacity, selfsufficiency), in addition to economic wealth (e.g., financial and material gains).

How to Assess Civic Wealth? In light of the holistic perspective we advocated for earlier in the chapter, and the fact that “the term civic also draws attention to the role of local participation, and to a sense of responsibility for others” (Lumpkin and Bacq 2019, p. 385), we propose that civic wealth constitutes a useful performance-based dependent variable for capturing the breadth of effects common in social entrepreneurship research. Indeed, the CWC perspective also links the inward-looking (what happens in the processes of creating social change) and the outward-looking (with what effects) of a social entrepreneurship initiative. How, then, can civic wealth be assessed? One answer is to measure the three components of civic wealth—social wealth, communal wealth, and economic wealth—separately, and to sum them creating a composite civic wealth score. For instance, one measure of social wealth accruals is quality of life, which can be captured by three main socio-environmental components (Liu 1975): individual status (examples of metrics include increased development of individual capabilities, larger opportunities for individual choice, and

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https://www.ashoka.org/en-us/embracing-complexity https://www.hsj.co.uk/community-services/why-community-sourced-solutions-lead-to-better-res ident-health/7026972.article

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improved existing opportunities for self-support); individual equality (examples of metrics include reduced economic discriminations against race and gender); and living conditions (examples of metrics include improved general, social, and environmental living conditions, along with improved physical surroundings such as infrastructure and public spaces). Other measures of social wealth include development of individual capabilities, individual equality, or access to health and education. For instance, Utting (2009) assessed the impact of fair trade coffee in terms of changes in livelihoods and socio-economic status of communities. In a recent theory piece, Kroeger and Weber (2014) suggest subjective measures of well-being as a way to assess social wealth, accounting for differences between aspiration and achievement. Communal wealth is suggestive of broader notions of wealth found in the literature (e.g., Berrone et al. 2012; Zahra et al. 2009). Metrics that attest to the creation of communal wealth include, for instance, an increased number of community-based enterprises, or a heightened level of economic empowerment in the social milieu of a community. Job creation and training for the poor and disadvantaged is a regular theme in social entrepreneurship research (e.g., Corner and Ho 2010; Di Domenico et al. 2010). As such, the percentage of community members who find permanent jobs is another measure of communal wealth given that it increases the capabilities of a community (i.e., a group of workers typically excluded from employment) through commerce and enterprising efforts (Battilana et al. 2015). Microfinance research examines increases in welfare (dwelling size, health, community ties) of previously unbanked clients as a result of receiving a loan (Randøy et al. 2015). Community cohesion, achieved through community stakeholders’ participation in the enterprise activities and governance stands as another measure of community wealth (Di Domenico et al. 2010). Similarly, Renouard (2011) developed an index which captures collective empowerment, and inter- and intracommunity relational capability as an outcome of social change initiatives. In management research, ratings of a firm’s community relationships (Crilly et al. 2016) could be another instantiation of communal wealth, provided that the type (e.g., bidirectional as opposed to one-way) and content of the relationships are specified. Economic wealth assessments use a number of well-established and familiar indicators that may include increased sales and revenues, increased productivity, increases in valuations due to improvements in community assets or infrastructure, technological development and other financial or productivity measures. To assess the social performance of social entrepreneurship initiatives, some researchers also consider indicators of economic well-being. For instance, Tobias et al. (2013) assess poverty reduction for Rwandan coffee farmers with economic indicators of personal wealth (e.g., savings), combined with social indicators such as subjective well-being. However, although potentially satisfactory, the summative approach of civic wealth’s three components may not adequately reflect the holistic nature of social performance measurement in a context such as CWC. Rather, civic wealth is created as an outcome of synergistic interactions among a variety of stakeholders, hence more than “the sum of the parts.” An alternative answer to the question of how to

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assess civic wealth thus consists in evaluating outcomes in relation to the internal mechanisms activated to create civic wealth. This approach emphasizes the importance of linking measurement of effects to measurement of processes.

Challenges Associated with Measuring CWC Lumpkin and Bacq (2019) distinguish three such mechanisms enlisted in the process of creating civic wealth: engaged participation, collaborative innovation, and resource mobilization. First, engaged participation recognizes the importance of involving stakeholders from each of the three categories involved in CWC—that is, community, enterprise, and regimes of support. Specifically, research shows that engaging the end-user stakeholder (the community) in the design and implementation of solutions—and the approaches to assess their effectiveness—allows a more nuanced sense of the potentially negative, or even perverse, effects of even well-intentioned social entrepreneurship initiatives (Hall et al. 2015; Nicholls 2018; Pruzan 1998; Twersky and Reichheld 2019). Indeed, many groups, such as the homeless, migrant workers, and people with mental illnesses, have clarity on their needs but lack the resources and political power to translate their needs into demand (Mulgan 2010). Research on alternative models of ownership and control—such as worker cooperatives, municipal ownership, community benefit agreements (Ratner and Allen 2013)—offers some insights into measuring participation (Stocki et al. 2012). To assess the degree of engagement of participants in the CWC efforts, one could measure the amount of time spent achieving a solution, and the extent to which all stakeholders who are affected by the social entrepreneurship initiative are partaking in the design of the solution. Additionally, one could capture the stakeholders’ ongoing involvement and the willingness to follow through with solutions by assessing dedication of resources, pledges of public support, and perseverance in implementing courses of action. For example, Ratner and Allen (2013) map stakeholders’ relative commitment to wealth creation in terms of the multiplicity of their connections with other actors and their capacity to co-create wealth. Further, research indicates that the success of continuous innovative co-creation activities for achieving extra-organizational goals is closely tied to the level of engagement of the different parties in dealing with the “inherent uncertainty of innovation” (Kanter 1999, p. 130). For instance, The Cisco Networking Academy used engagement with high schools to leverage its expertise to continually broaden and deepen the relationship with new innovations (Porter and Kramer 2002, cited in Austin and Seitanidi 2012, p. 742). This is closely related to the second mechanism, collaborative innovation. The innovations that aim to bring about social change can be assessed in terms of their cost of production, operational efficiency relative to previous solutions, new technologies (Stafford et al. 2000), potential reach, replicability and scalability (Christensen et al. 2006). But in a CWC context, another key indicator is the extent

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to which the innovations are the result of collaboration. Collaboration goes beyond engagement to include negotiating and communicating, joint decision-making, power sharing, and collective action (Kania and Kramer 2011; Ostrom 1990). Scholarly discussions about measuring power sharing and collective action revolve around the issues of by whom, for whom, and to what end such actions are taken (Bryson et al. 2006; Poteete and Ostrom 2004). If context-specific benchmarks that address such concerns are known, surveys can aid in assessing levels of and changes in inter-stakeholder collaboration (Van de Ven and Ferry 1980). Because the effectiveness of collaborations may only be knowable over time, longitudinal studies and action research using interview data, archives of communications (e.g., emails, memos, strategic plans) and participant observation may be more advantageous for assessing the outcomes of collaboration efforts (Huxham and Vangen 2000; Rynes et al. 2001). Finally, the third mechanism is the mobilization of resources, both tangible and intangible. Alvord and colleagues found that the successful social enterprises were those that could rally stakeholders to mobilize local assets and posited that, “mobilizing resources with the local partners increases the likelihood of sustainable change because of their grounding in local commitments and capacities” (Alvord et al. 2004, p. 270). The degree to which stakeholder efforts translate into resources pledges is another way of gauging the creation of civic wealth. Tangible resources are often monetized and can be measured in terms of dollars invested, physical space allocated, or pecuniary value of volunteer hours donated. Intangible resources, such as human or social capital involved in CWC efforts, can be assessed using demographic and social network analysis techniques. By linking measurement of effects to measurement of processes, this approach underlines CWC’s holistic perspective on social change. We turn next to specific indicators and metrics of civic wealth.

Indicators and Metrics of Civic Wealth To assess changes in stocks of civic wealth, measures are needed to appraise the well-being of a community, its intellectual and affective capacities, and material resources. Table 7.1 includes a non-exhaustive set of indicators and metrics that might be used to gauge evidence that civic wealth has been created in a particular community, by distinguishing among the three definitional components of CWC. These metrics range from the kind of concrete data that might be available from a public report (e.g., GDP, participation rate in the last elections) to less direct proxies such as the number of cultural opportunities and local cultural events, or economic dignity—the capacity to care for family and experience its greatest joys, the pursuit of potential and purpose, and economic participation without domination and humiliation (Sperling 2013). All these metrics are captured at the civic level. As a result,

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Table 7.1 Extra-organizational indicators and metrics of civic wealth Definitional components of CWC Well-being and happiness of a community

Indicators, as “changes of state” (and examples of relevant SDGs) Change of state in human development (SDGs 1, 3, 4, 8)

Change of state in health (SDGs 3, 6)

Metrics a,b Life expectancy at birth Adult literacy rates Gross enrollment ratios # of years of schooling Gross National Income per capita (PPP US$) Availability, affordability and quality of medical care and healthcare Life expectancy at birth Child mortality rate

Change of state in security (SDG 16)

Criminality rate Crime prevention measures Law enforcement

Change of state in natural environmental quality (SDGs 6, 7, 13, 14, 15)

Comparative levels of pollutions and emissions Waste reduction and recycling practices Environmental protection/ reinvestment

Possible data sourcesc Human Development Index: http://hdr.undp.org/ en

Gross National Happiness (GNH), an index based on “areas of psychological well-being, cultural diversity and resilience, education, health, time use, good governance, community vitality, ecological diversity and resilience and economic living standards” http://www. grossnationalhappiness. com/ Public crime statistics Uniform Crime Reporting (UCR) Program https://www.fbi.gov/ser vices/cjis/ucr/ United Nations Office on Drugs and Crimes https://dataunodc.un.org/ crime Pollutant emissions (e.g. Greenhouse gas emissions) by year (from 1990) https://stats.oecd.org/ Index.aspx? DataSetCode¼EPER# The global e-waste monitors https://collections.unu. edu/eserv/UNU:6341/ Global-E-waste_Moni tor_2017__electronic_sin gle_pages_.pdf Practices referred by (continued)

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Table 7.1 (continued) Definitional components of CWC

Intellectual and affective capacities of a community

Indicators, as “changes of state” (and examples of relevant SDGs)

Metrics a,b

Change of state in intellectual capital (SDGs 4, 8)

Literacy rates Graduation rates Environmental awareness Intellectual property applications Proportion of scientific manpower

Change of state in autonomy and selfdetermination (SDGs 5, 10)

Index of economic freedom % of community members in local leadership % of women in local leadership Race/gender discrimination rates Self-actualization

Change of state in civic pride (SDGs 11, 16)

Participation rate in community events Voting rate Esteem for the community

Possible data sourcesc Environmental Protection Agency for waste reduction different areas: https:// www.epa.gov/recycle/ reducing-waste-what-youcan-do Toxics Release Inventory (TRI) Program: https://www.epa.gov/ toxics-release-inventorytri-program/tri-data-andtools UNICEF data, UN Environment World literacy rates (also country-wise) https://data.worldbank. org/indicator/SE.ADT. LITR.ZS World Intellectual Property Organization https://www.wipo.int/ ipstats/en/ https://www.wipo.int/ econ_stat/en/economics/ research/ Economic freedom https:// www.heritage.org/index/ ranking Leadership and political participation of women: https://www.unwomen. org/en/what-we-do/leader ship-and-political-partici pation/facts-and-figures https://www.catalyst.org/ research/women-inmanagement/ Polls Voting-age population (VAP) turnout https://www.pewresearch. org/fact-tank/2018/05/21/ u-s-voter-turnout-trailsmost-developed-countries/ (continued)

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Table 7.1 (continued) Definitional components of CWC

Indicators, as “changes of state” (and examples of relevant SDGs) Change of state in cultural identity preservation (SDGs 8, 11)

Change of state in transparency in local, regional and national governance (SDG 16)

Community resources and material prosperity of a community

Metrics a,b Community belongingness # of cultural opportunities # of local cultural events Corruption levels Implementation of checks and balances Freedom of press

Change of state in reliance on locallycontrolled, locallyowned resources (SDGs 8, 10)

Within region/outof-region utilization rates Product/service consumption patterns Migration rates

Change of state in local commercial activity (SDGs 8, 9)

Rate of new venture development Employment rate Regional GDP New market development

Change of state in productivity and competitiveness (SDGs 2, 9, 12)

Adoption rate of technological advances Comparative employee productivity rates Comparative operational efficiency

Possible data sourcesc Municipality data

Corruption level indicators by country or topic: https://www.transparency. org/country Freedom of press ranking worldwide https://rsf.org/en/ranking Data for use of commodity country-wise and statewise, top commodities in each state https://www.census.gov/ foreign-trade/statistics/ country/index.html Migration rate statistics: World bank (https://data. worldbank.org/indicator/ SM.POP.NETM), CIA (https://www.cia.gov/ library/publications/theworld-factbook/ rankorder/2112rank.html) Government data, at the national, regional, and city levels Unemployment rate https://data.worldbank. org/indicator/SL.UEM. TOTL.ZS Regional GDP (Bureau of Economic Analysis) https://www.bea.gov/data/ gdp/gdp-state Employee/labor productivity measured by GDP per hour worked https:// data.oecd.org/lprdty/gdpper-hour-worked.htm Technologies likely to be mastered by 2020: http://siteresources. (continued)

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Table 7.1 (continued) Definitional components of CWC

Indicators, as “changes of state” (and examples of relevant SDGs)

Change of state in dependence on governmental or charitable support (SDGs 1, 10, 11)

Change of state in infrastructure (SDGs 9, 11)

a

Metrics a,b

Possible data sourcesc

rates Comparative profit margins Status, commercial operation, and utilization of resources of farms Comparative levels of charitable giving Comparative levels of public spending on social services Comparative levels of earned-income driven start-ups

worldbank.org/ INTGEP2008/Resources/ GEP08-Brochure.pdf Company annual reports

Public space attrition rate Transportation infrastructure (e.g., road, rail, air) Sustainable urban infrastructure (e.g., green building)

Social expenditure database https://www.oecd.org/ social/expenditure.htm Charities Aid Foundation WGI (World Giving Index) measures how countries give: https://www.cafonline. org/about-us/publica tions/2019-publications/ caf-world-giving-index-10 th-edition Company P & L reports (included in annual reports) Good Public Space Index (GPSI)

We take into account the interdependence relationship among the component indicators. Therefore, some metrics are shared by different indicators (e.g., life expectancy can be used to measure both human development and health) b In line with the civic level of analysis of the CWC framework, measures of civic wealth include only aggregate measures of individual well-being (i.e., life satisfaction) c For some indicators, it is less likely that data sources preexist, and data may need to be collected at the level of the community, by way of qualitative or quantitative methods

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we have been able to contribute at a civic level of analysis to the grander measurement challenge associated with the UN’s SDGs (e.g., Costanza et al. 2016). Table 7.1 links CWC measures and indicators to specific SDGs.15

Further Considerations • The role of stakeholder cooperation and engagement for impact measurement: As noted above, a core element of the CWC approach is a multiplicity of stakeholders, representing the community, enterprise and regimes of support categories, who join forces to bring about social change. Such grounding of CWC on the principle of stakeholder cooperation echoes the growing importance in social impact accounting of rebalancing asymmetric patterns of power relations. Including end-user stakeholders who typically have less power and control, such as clients and beneficiaries, is a way of ensuring the relevance of impact measurement processes (Benjamin 2012; Twersky et al. 2013). This includes decisions over why to measure, what to measure and how to measure it (Lyon and Arvidson 2011). The SROI methodology is actually built on a set of similar principles meant to give voice to multiple stakeholders (Arvidson et al. 2013). These principles may have increasing relevance in the future in the face of increasing “upward accountability.” Indeed, patrons and funders have more power and control than the stakeholders towards whom the social change is targeted (Ebrahim 2003). This pattern of asymmetric power relations is becoming more prevalent across the world due to grant making and philanthropy moving from a previous position of a “fund it and forget it” approach (Leat 2006) to a view that sees funding as an investment that requires understanding of “value for money” (Ostrander 2007). • Measuring capital endowments interventions:

beyond measuring the effects of

Recent wealth creation approaches to measurement of progress toward shared development goals involve seven types of capital16 that capture wealth at the community level (Ratner and Allen 2013). Measuring wealth in terms of capital 15

GOAL 1: No poverty; GOAL 2: Zero hunger; GOAL 3: Good health and well-being; GOAL 4: Quality education; GOAL 5: Gender equality; GOAL 6: Clean water and sanitation; GOAL 7: Affordable and clean energy; GOAL 8: Decent work and economic growth; GOAL 9: Industry, innovation and infrastructure; GOAL 10: Reduced inequality; GOAL 11: Sustainable cities and communities; GOAL 12: Responsible consumption and production; GOAL 13: Climate action; GOAL 14: Life below water; GOAL 15: Life on land; GOAL 16: Peace and justice strong institutions; GOAL 17: Partnerships for the goals. For more information about the 2030 Agenda for Sustainable Development, see https://sustainabledevelopment.un.org 16 Intellectual, social, individual, built, natural, political and financial (Ratner and Allen 2013).

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shifts attention away from traditional views of wealth as money and material possessions, and brings the benefit of enabling shared language and understanding across different contexts. As such, we can think of equivalents for social, community, economic, and civic wealth. For instance, social wealth corresponds to social capital, that is, the network connections, interpersonal relationships, and norms of reciprocity and trust found in civil society (Putnam 2001). Community wealth maps onto cultural capital, which captures characteristics of human capital as well as the shared experiences, artifacts, and traditions that build and preserve a community’s identity (Groen et al. 2008). Economic wealth corresponds to economic capital, referring to stocks of resources, financial assets and productive capabilities (Zahra and Wright 2016). Civic wealth, as the synergistic combination of the three other types of wealth, corresponds to the idea of strategic capital which refers to a community’s “ability to mobilize resources, exercise political power and more effectively attain its civic-level goals” (Lumpkin and Bacq 2019, p. 396). With regard to measuring civic wealth as stocks of resources and assets, CWC researchers will have to address the questions of whether and which resources are used temporarily during the wealth creation process, or become part of the stock of civic wealth that accumulates. Research in arenas of economic development (Dorius 2011), interorganizational cooperation (Reficco and Márquez 2012; Ring and Van de Ven 1994) and public administration and management (Cowling 2006; Propper and Wilson 2003) offers promising avenues for understanding how to assess extraorganizational phenomena such as CWC. • Wealth as more than money and material possessions: Widening our appreciation for the concept of wealth calls for interesting future research that revolves around the question of how an enterprise involved in CWC can prioritize creating civic wealth for the community, compared to creating wealth for its owners, employees, customers and other more immediate stakeholders. In the case of a social entrepreneurship initiative that does not include all three kinds of wealth (see Lumpkin and Bacq 2019 on partial models of CWC), measuring wealth distinctly (i.e., measuring social, community, and economic wealth separately) may help identify which stakeholder group may be too passive to be engaged in a way that increases the creation of civic wealth. The question thus moves from an organization-centric view of “how does involving stakeholders in the organization’s activities influence organizational performance?” to a civic-level view of “how does the organization (in a broader, more “joint venture like” sense) influence the involvement of stakeholders in the creation of civic wealth for society?” It is our hope that our discussion of the concept of civic wealth as a performancebased dependent variable, and proposed techniques for measuring it, sheds light on the opportunities it offers for the field of social entrepreneurship, and beyond.

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Conclusion In this chapter, we have proposed a holistic view of social performance as an aggregate of the concept of operational sustainability and social impact. After reviewing the reasons why measuring social performance is important for various stakeholders, yet challenging, we have offered guidelines that can help social entrepreneurs and social entrepreneurship researchers develop a social performance measurement strategy that meets their specific needs. We then have suggested civic wealth as a relevant performance-based dependent variable for social entrepreneurship research, and proposed a set of indicators and metrics that capture the social, economic, and communal endowments generated by social enterprises and the communities where they are located. Measuring the effectiveness of social enterprises’ efforts continues to be a major challenge for both researchers and practitioners. We hope the ideas and suggestions in this chapter spur new insights that raise awareness about the importance of social impact and operational sustainability, and contribute to improved methods for understanding and assessing social performance. Acknowledgements The authors would like to thank the Editors, Antonino Vaccaro and Tommaso Ramus, for the opportunity to be a part of the Handbook. They are indebted to Alnoor Ebrahim for his insightful comments and thoughtful suggestions on this chapter, and to Sadek Showkat for his research assistance. This chapter is partially based on ideas that emerged through the first author’s work on and collaboration with the ROSE project and the LEVO framework (www.levo-framework.com).

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Christina Hertel, PhD is a Postdoctoral Research Associate and Lecturer at the Chair of Entrepreneurship and Technology Commercialization at the Swiss Federal Institute of Technology Lausanne (EPFL). She has received her doctorate from the Technical University of Munich (Germany). Christina’s research focuses on entrepreneurship as a means to tackle local and societal problems, particularly on collective entrepreneurial solutions. For her work on community-based entrepreneurship, she has been awarded with the Roman Herzog Research Award. She has taught courses on sustainable entrepreneurship in Germany, Austria and Switzerland, and has co-initiated and led the International Summer School on Sustainable Entrepreneurship at TUM. Christina is the lead of a research project on entrepreneurial impact measurement in collaboration with Tech4Impact. In this role, she actively supports the development of a framework to assess operational sustainability and impact of start-ups in a systematic way, and to build up a database allowing to advance research on the social performance of entrepreneurial ventures (www.levo-framework.com). Sophie Bacq, PhD is an Associate Professor of Entrepreneurship and an Institute for Entrepreneurship and Competitive Enterprise (IECE) Faculty Fellow at the Kelley School of Business, Indiana University. Sophie’s research focuses on entrepreneurial action aiming to solve intractable social and environmental problems, at the individual, organizational and civic levels of analysis. Sophie has taught and conducted empirical research on the topic in Europe, the United States and South Africa. Her research has been published in the top management and entrepreneurship journals

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including Academy of Management Review, Academy of Management Discoveries, Academy of Management Learning & Education, Academy of Management Perspectives, California Management Review, Entrepreneurship & Regional Development, Entrepreneurship: Theory & Practice, Journal of Business Ethics, Journal of Business Venturing, and Journal of Small Business Management, and she has co-edited three books on social entrepreneurship. Sophie is a Field Editor at the Journal of Business Venturing, an Associate Editor at the Journal of Social Entrepreneurship, and serves on the Editorial Review Board of Academy of Management Journal, Entrepreneurship: Theory & Practice, and Journal of Management. She is the co-Director of The Annual Social Entrepreneurship Conference, one of the premiere academic gatherings on the topic. She co-teaches the annual Social Entrepreneurship Doctoral Seminar (https://sedocseminar.org) with Tom Lumpkin. She received her doctorate in Economic and Management Sciences from the Université catholique de Louvain (Belgium). G. T. (Tom) Lumpkin, PhD is Michael F. Price Chair and Professor of Entrepreneurship in the Entrepreneurship and Economic Development Division of the Michael F. Price College of Business the University of Oklahoma in Norman, OK. His primary research interests include entrepreneurial orientation, social entrepreneurship, and family business. He is a globally recognized scholar whose research has been published in Academy of Management Review, Academy of Management Journal, Academy of Management Perspectives, Strategic Management Journal, Strategic Entrepreneurship Journal, Entrepreneurship Theory and Practice, Journal of Business Venturing, Journal of Social Entrepreneurship, and Family Business Review. Tom served as Co-Editor of Strategic Entrepreneurship Journal for 6 years (2012–2017) and currently serves on the Advisory Board of Family Business Review. In 2018, Tom received the Mentor Award from Entrepreneurship Division of the Academy of Management which “recognizes exceptional mentoring activities at all educational levels in the field of entrepreneurship.” He is the 2009 recipient of the Foundational Paper award from the AOM Entrepreneurship Division for a “classic and highly influential contribution to entrepreneurship research that serves as a legacy for scholarly work in the field” for his paper “Clarifying the Entrepreneurial Orientation Construct and Linking it to Performance,” published in 1996 (with Gregory G. Dess). A paper based on that research—“Entrepreneurial orientation and business performance: Assessment of past research and suggestions for the future” (with Andreas Rauch, Johan Wiklund and Michael Frese)—won the 2015 Greif Research Impact Award.

Chapter 8

The Adoption of Managerialist Practices in Social Enterprises Karin Kreutzer

Abstract Despite an increasing scholarly interest in social enterprises, our understanding of the multifaceted nature of practice adoption in such hybrid organizations remains limited. A review of the literature on translation and practice adoption advances our understanding of the problems and challenges of social mission-driven organizations adopting managerial practices. In doing so, I suggest the translation of management practices to fit the specific context of social enterprises may not only alter the practice itself but also the beliefs of members regarding what their organization is and stands for. Keywords Social enterprises · Hybridity · Managerialist practices

Introduction The blurring of boundaries between the social, market and public sector has received considerable scholarly attention (Dees and Anderson 2003). It has been defined as “a wide variety of approaches, activities, and relationships that are blurring the distinctions between nonprofit and for-profit organizations, either because they are behaving more similarly, operating in the same realms, or both” (Dees and Anderson 2003: 16). A prominent example of such organizations operating at the interface between the market and the social sector are social enterprises. They combine elements of private-sector organizations that are guided by market forces to maximize financial return, owned by shareholders, governed according to size of share ownership, and generate revenues from sales and fees on the one hand with elements of not-for profit organizations that pursue social and environmental goals, are owned by members, governed by private election of representatives, staffed by a combination of employees and volunteers and generate revenue from membership fees and

K. Kreutzer (*) EBS Universität für Wirtschaft und Recht, Oestrich-Winkel, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_8

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donations (Billis 2010). Such a combination allows social enterprises to build efficient and effective business models to drive positive social change (Stephan et al. 2016). Social enterprises tackle complex challenges such as poverty, social exclusion, and environmental problems in novel and innovative ways while achieving financial self-sustainability also through market-based revenue generation rather than only public funding or donations (Pless and Appel 2012; Ramus et al. 2017; Zahra et al. 2009). They have been conceptualized as enterprises focusing on value creation for the benefit of society or the environment, rather than the value capture typical of commercial enterprises (Santos 2012). Thus, we define social enterprise as bottom line organizations that seek to address societal problems through business ventures, having a dual nature, social and commercial. For example, Habitat for Humanity requires new homeowners to pay mortgages. Grameen Bank provides small business loans to an economically disadvantaged rural population in Bangladesh which otherwise would not have access to banking services. Dialogue Social Enterprise charges fees for its exhibitions that offer experiential learning experiences. However, there may also be limits to the social challenges that can be effectively addressed by drawing upon an entrepreneurial mindset (Kreutzer and Mauksch 2014). In this chapter, I will introduce our current knowledge about the adoption of managerialist practices in social enterprises summarizing what we know about the diffusion and translation of practices. I develop a conceptual model of the interplay of reciprocal change processes that the adoption of managerialist practices induces in social enterprises.

The Adoption of Managerialist Practices in Social Enterprises Social enterprises face increased competitive pressure (Eikenberry and Kluver 2004; Hwang and Powell 2009; Powell and Steinberg 2006). In order to respond to such pressures, they increasingly adopt practices originally developed for for-profit firms (Salamon 1993; Weisbrod 1998) in an attempt to mimic those organizations – in their view a superior form of organization. From an institutional perspective, pressures to conform with regulatory norms, links to organizations that diffuse managerialist practices (e.g., academia, consultants, etc.), and the informal sharing of ideas with organizational networks (DiMaggio and Powell 1983) motivates organizations to introduce new practices (Lozeau et al. 2002; Meyer and Rowan 1977). In such circumstances, the adoption of techniques that are viewed as rational, modern and progressive can enhance an organization’s legitimacy (Westphal et al. 1997). Such managerialist practices include behaviors, strategies, beliefs, technologies, or structures (Strang and Soule 1998) which originate from a context dominated by a market logic including examples such as Total Quality Management (Zbaracki 1998) or Six Sigma (Canato et al. 2013).

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The trend is further exacerbated by various constituents putting a greater emphasis on accountability and efficiency in the social sector (Hwang and Powell 2009). In particular, external stakeholders adhering to a commercial logic push social enterprises towards becoming more “business-like”. For example, Seelos and Mair (2017) suggest that investors and donors may over-emphasize the “mantra” of disruptive innovation in social enterprises rather than truly focusing on social impact generation. In addition, the adoption of managerialist practices has been accelerated by managers who consider them crucial to survival and growth, as well as by external consultants who have been pushing their way into the social sector (Gammal et al. 2005; Hwang and Powell 2009). Since social enterprises are dependent on commercial revenue in order to sustain their operations, they are inherently at risk of giving priority to managerialist practices which enable them to generate revenue and thereby survive – over social practices which enable them to achieve their mission (Ebrahim et al. 2014). For example, social enterprises report having introduced the balanced scorecard, agile methodologies, innovation management tools, strategic planning, and big data analysis tools. Managerialist practices from the for-profit sector, however, rely on assumptions that may differ from those of other sectors (Lozeau et al. 2002). Social enterprises are characterized by a coexistence of a “social” and a “commercial” institutional logic (Pache and Santos 2013). Institutional logics provide “socially constructed historical patterns of material practices, assumptions, values, beliefs and rules” (Thornton and Ocasio 1999: 84). The social logic present in social enterprises is shaped by values such as individual worth and dignity, democracy, responsibility, freedom, tolerance and voluntarism (O’Connell 1988), which may be at odds with over the profitmaximizing strategies of a commercial logic emphasizing efficiency, profit, and private welfare (York et al. 2016). A managerialist practice will be inspired by norms, beliefs, and values of the market; that is by specific market-oriented assumptions about the appropriate goals or the appropriate ways of accomplishing tasks (Ansari et al. 2010; Canato et al. 2013). Thus, the adoption of managerialist practices from a for-profit context with its own distinct meaning systems and symbolic and regulatory processes may need a certain degree of translation (Haedicke 2012) to fit the reality of social enterprises. Practices change and are adapted to specific local circumstances when they travel from one context to another (Sahlin and Wedlin 2008; Zilber 2006). Managerialist practices which are advertised as universally applicable and which diffuse across industries and sectors, become heterogeneous and lead to variation when implemented and translated at the local level (Drori et al. 2014). The introduction of managerialist practices may trigger resistance from internal and external stakeholders championing the social mission of the organization (Glynn 2000; Golden-Biddle and Rao 1997), thus further exacerbating existing tensions between social and commercial goals in social enterprises (Besharov and Smith 2014). Ansari et al. (2010: 78) defined the compatibility between a new practice and the existing organizational culture of a potential adopter as the “degree of cultural fit”, that is the degree to which “the characteristics of a diffusing practice are compatible with the cultural values, beliefs, and practices of potential adopters”.

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Thus, a potential misfit may be determined by the ‘distance’ between the context of the diffusing practice and the reality of the adopting organization (Ansari et al. 2010; Fiss et al. 2012; Morris and Lancaster 2006). Such misfit induces resistance if members come to understand the new practice as threatening deeply held beliefs about the organization (Canato et al. 2013), which may result in a delayed (Love and Cebon 2008) or symbolical adoption of a new practice (Wickert et al. 2017), eventually leading to the adaption of the practice to fit the new context (Lozeau et al. 2002). In so doing, social enterprises create their own versions of popular managerial practices.

Diffusion of Managerialist Practices A proliferation of research provides insights on the macro-level diffusion of practices of “how things—ideas and practices—get from here to there” (Katz 1999: 145). Management ideas and practices are however accepted, developed and disseminated if they are seen to provide solutions to the prominent problems of the time or to respond to macro-level development and demands (Guillén 1994). In post-WWII Europe, a number of countries imported management doctrines from the US, which has since served for many of them as a ‘reference country’ (Üsdiken 2004). Research has shown that both the launching and dissemination of new fashions have been significantly influenced by fashion-setters such as the business media, consultants, ‘gurus’ and business schools (Abrahamson 1996). A large number of studies concentrate on the fashion setting perspective in the diffusion process (Abrahamson 1996; Abrahamson and Fairchild 1999; Clark 2004; Mazza and Alvarez 2000; Sahlin-Andersson and Engwall 2002). The diffusion perspective highlights the pressures for social conformity in the process of legitimization (Guillén 1994; Guler et al. 2002; Soule 1999; Tolbert and Zucker 1983). Abrahamson’s (1996) influential work in the area of management fashion emphasizes the idea-push side in the diffusion process, where fashion setters such as consulting firms, business massmedia publication, business schools and management gurus spread management innovations. At the organizational level, the adoption of managerialist practices has been elucidated in the literature through two general explanations: the rational and the social explanation (Ansari et al. 2010). According to the rational account, motivation for management trend adoption stems from presumed economic benefits such as cost-effectiveness, first-mover advantages, fear of weak performance due to failure to adopt new practices, or imitation of others in an attempt to cut costs in fashion searching practices (Ansari et al. 2010). That is, the popularity of managerial ideas depends on their ability to provide convincing solutions to practical managerial problems (Abrahamson 1996). According to social accounts, the appeal and rationale for choosing and using management ideas and practices stems from the pressure to conform and the search for legitimacy. A firm must adopt a management fashion because others have done

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so, in order to appear to be in conformance with the norm (Ansari et al. 2010). The social explanation thus posits that management idea adoption has a more symbolic meaning than the rational account suggests. It may well be that novel management ideas and practices do little to increase the economic performance of organizations, but that adopting them sends an important message to relevant stakeholders, or that it makes sense in terms of impression management (Abrahamson 1996; Abrahamson and Fairchild 1999). For example, the adoption of a certain novel managerialist practice may serve to signal that the social enterprise is forward-thinking and innovative, e.g., to investors, donors, or customers. Furthermore, organizations may decide to adopt new ideas and practices on the basis of the decisions of other similar organizations, especially when they are uncertain about the real benefits of the idea or practice (Abrahamson 1996). While research on diffusion enhances our understanding of why practices are initially adopted by organizations, Ansari (2014) show what happens to practices during and after adoption. Since managerialist practices often cannot be adopted as “off-the-shelf” solutions, they will be adapted to fit the local context. Zbaracki (1998) analyzed the relationship between the rhetoric and reality of total quality management (TQM). He demonstrated how a well-established tool like TQM was constructed and adapted differently in different organizations. On a related note, Frenkel (2005) examined scientific management and human resources models that were imported from the United States into Israel and were then reinterpreted by the state, private employers, and a labor union to be more in line with prevalent macrocultural discourse. Reay et al. (2013) discuss the role of managers in micro-level theorizing and in facilitating the development of collective meaning so that the new practice becomes widely understood in the organization. They argue that managers need to encourage employees to try the new practice in order to “make it their own” instead of imposing a single meaning on the practice and then advocating for it (Reay et al. 2013). Morris and Lancaster’s study of the introduction of “lean management” into the construction industry shows how it is rendered appropriate to the new setting through translation from the board policy level to a set of specific practices (Morris and Lancaster 2006). They find a large ‘distance’ between the original arenas of the idea and its new one. Translation may then serve as a multi-layered process through which such “ideological distance” (Wickert et al. 2017) between host and originating settings is reduced by the use of different organizational change interventions.

Translation of Practices The concept of translation revolves around the question of how ideas and practices are inevitably altered – rather than simply passed on – as they travel through different fields and over time (Czarniawska and Joerges 1996; Sahlin and Wedlin 2008; Zilber 2006). Latour (1986) characterized translation as involving “the spread in time and space of anything – claims, orders, artefacts, goods” (Latour 1986: 267). Over the

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last several decades, translation has experienced a significant increase in popularity as a particularly useful concept in understanding the processes through which ideas and practices are spread, adopted, changed, and recontextualized in organizations (Wedlin and Sahlin 2017). Translation can be defined as an editing process connecting the organizational environment to local interactions and “people produc(ing) meaning from the encounter of contradictory ideas and practices” (Haedicke 2012: 62). Barley (1986) showed how the adoption of the same idea by two different organizations resulted in very different practices on the front line. Thus, isomorphic tendencies of homogenization, e.g., practices which are advertised as universally applicable and which diffuse across industries and sectors, become heterogeneous and lead to variation when implemented and translated into a new context (Drori et al. 2014). Most studies to date haven given insights on translation processes where ideas travel in similar organizational fields (Lounsbury and Pollack 2001) or across different levels (national and industry level). However, we still lack a detailed understanding of the processes on the organizational level of how managerialist practices are translated that have originated from a different organizational field with a very different set of goals, values and beliefs and how such translation processes may – in turn – change the social enterprise itself.

Marketization of Social Enterprises Social enterprises are confronted with tensions that are inherent (Berglund and Schwartz 2013; Smith et al. 2013) and persistent (Jay 2013) to their organizational nature. For example, social and business objectives compete for limited resources (Jay 2013), i.e., due to time and budget constraints (Berglund and Schwartz 2013), allocating more attention and/or resources to one concern might negatively affect the other (Battilana and Lee 2014; Smith and Tracey 2016). Thus, social enterprises are, by definition, sites of contradiction, contestation and conflict (Doherty et al. 2014). Tensions arise, for example, when an increased focus on profit-seeking activities exposes social enterprises to the risk of “mission drift”. Mission drift refers to the risk of social enterprises losing sight of their social missions in their efforts to generate revenue (Ebrahim et al. 2014; Jones 2007). Such development may threaten the organization’s commitment to the accomplishment of their social mission (Grimes et al. 2019; Ramus and Vaccaro 2017). Exposure to markets may reorient shared cultural values and identity beliefs (Ravasi and Schultz 2006) towards competition and away from social impact and public benefit (Weisbrod 1998). Other drawbacks of “commercializing” include increased resource dependence on external constituents which may not share the same concern for the social mission (Lee et al. 2018). An important stream of literature on social enterprises and not-for-profit organizations examines the growing trend of adapting practices which originate from the market sector in an attempt to “become more business-like” (Dart 2004; Sanders and

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McClellan 2014). From a critical perspective, this transformation of the “social” has been described as “rationalization” (Hwang and Powell 2009), managerialism (Maier et al. 2016), marketization (Eikenberry and Kluver 2004; Gainer and Padanyi 2005; Macedo and Pinho 2006), or professionalization – referring to the hiring of professional experts (Salamon 1999). The literature on social enterprise (Kerlin 2009) and social entrepreneurship (Mair and Martí 2006) views the increasing introduction of managerial tools and concepts positively and points to the potential for innovation. Akemu et al. (2016) illustrate how the social enterprise Fairphone, originally born as an awareness campaign, then developed into a fully-fledged business which started to produce and sell fair smartphones. Similarly, Lee et al. (2018) point to benefits of commericalization, which in the case of a Sicilian anti-racket social movement organization served as a “mobilizing technology” alongside more conventional, political social movement repertoires to advance movement goals. Participation in markets may offer advantages over purely political tactics, including the ability to design new products and services, to directly select employees, customers, investors, and other actors and mobilize consumers for a social cause (Lee et al. 2018). Thus, an increased entrepreneurial orientation may allow social enterprises to be more innovative, risk-taking and proactive (Lurtz and Kreutzer 2016; Weerawardena and Mort 2006). By contrast, the seminal work of Mancur Olsen suggests that when, as a consequence of market signaling changes, community organizations become more professionalized and structured to a greater degree around principles of rationality, the formal definition of rules, and the construction of bureaucratic roles, then organizations become more exclusive and hence less participatory and less democratic (Olson 1965). Similarly, Oakes et al. (1998) study the introduction of business planning and performance measures in the provincial museum and cultural heritage sites of Alberta, Canada. They show how business planning, with its reference to markets and products, and performance measures, with their emphasis on economic impact, had subtly operated to destabilize a firm and its sense of organizational identity. Those practices resulted in the member’s growing consciousness of the organization also being a market operation. In this case, strategic performance measurement legitimated decisions in terms of increasing economic impact, thus valorizing certain decisions over others (Oakes et al. 1998). Golden-Biddle and Rao (1997) find that the introduction of managerialist practices such as budget control mechanisms (including greater scrutiny of travel expenses) in a not-for-profit organization created conflict, which triggered identity ambiguity. An organizational shift to a dominance of managerialist practices may trigger resistance from ideologically oriented supporters (Battilana and Dorado 2010; Ebrahim et al. 2014). The consequences of such changes may be severe since it threatens their very raison d’etre: if social enterprises lose sight of their social mission, they will fail to create social impact and risk their legitimacy. Empirical research has shown how the introduction of managerialist practices threatened the core beliefs volunteers held about their organization (Kreutzer and Jäger 2011). The experience of misfit thus may trigger a process of adapting and – ultimately – translating the managerialist practice to fit the context.

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Jacobs et al. (2021) show how an international children’s rights organization was perceived by some of its members as acting “out of character” due to an increased introduction of business practices, which led to members experiencing an “organizational identity breach”, that is, a sense of violation of organizational identity beliefs among a group of organizational members. This sense of violation catalyzed the development of a series of political strategies by members who sought to recalibrate the organization’s identity. Indeed, in their case study on the introduction of Six Sigma at 3 M, Canato et al. (2013) suggest that the implementation of a culturally dissonant practice may involve mutual adaption of practices on the one hand and organizational culture on the other. This process continues until the tension between the new (managerialist) practice and the reality of the organization is resolved. This process of adapting the practice to make it more compatible with the organization and at the same time adjusting the organization has been defined as “customization” (Westphal et al. 1997). Institutions and circulated ideas may thus mix in more profound ways than previously conceptualized. Such “ecologies of translation” (Wedlin and Sahlin 2017) account for the many complex interactions and relations, actions, actors and interests in a continuous translation process which can neither be controlled nor planned. Thus, I suggest that the translation of management practices to fit the specific context of social enterprises may not only alter the practice itself but also the beliefs of members regarding what their organization is and stands for.

Towards a Model of Social Enterprises Adopting Managerialist Practices In this chapter, I develop a conceptual model of the interplay of reciprocal change processes which the adoption of managerialist practices induces in social enterprises (see Fig. 8.1). The key point is that in the process of introducing a practice that originates from the for-profit sector, members will most likely experience (perceived) misfit, which will trigger process of adapting, changing and altering the practice to fit the local context. Such processes of translation, which may be inherently political in nature, change the shared beliefs of members of its organizational identity, that is “who are we as an organization”. While on the surface the changes seem to take place mainly on the practice level, existing research suggests that the process of translation itself will impact the shared understanding of members about the very identity of their organization (Golden-Biddle and Rao 1997). In such processes, actors may employ political strategies to advance their own identity beliefs and interests also with the aim to influence other members (Cannon and Kreutzer 2018; Jacobs et al. 2021) in order to promote or prevent the introduction of the managerialist practice, or to advocate for changes to increase the fit of the practice. For example, the strategic use of optimistic rhetoric and success-related narratives (Zbaracki 1998) as well as coercive exposure to the new managerialist

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Adopting context: social enterprise

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Fig. 8.1 Social enterprises adopting managerialist practices

practice (Canato et al. 2013) will induce more permanent changes in shared beliefs. Thus, the adoption of managerialist practices may – inevitably – shift the balance between institutional logics (Besharov and Smith 2014), often – but not always – in favor of a more dominant commercial logic. Social enterprises which carefully monitor their identity and changes thereof will be able to moderate processes of practice adoption to avoid conflict, mission drift, or organizational paralysis (Kreutzer and Jacobs 2020). A systematic and recurring process of reviewing the mission statement as a normative framework for an organization’s raison d’être mitigates such risks.

Conclusion The study of social enterprises has attracted a large number of scholarly contributions. The predominant perspective on institutional logics and social enterprises as hybrid organizations is firmly rooted in institutional theory (Battilana and Dorado 2010). This chapter offers an additional theoretical angle which allows us to

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understand the complex reality of social enterprises. In a nutshell, facing pressures from different institutional fields, social enterprises increasingly decide to adopt managerialist practices which originally have been developed for a for-profit context. The experience of misfit then leads to a process of translating the practice to fit the local context. Such processes of adaption and practice change in turn transform the social enterprise itself, eventually resulting in a more dominant commercial orientation. Thus, the conceptual model advances our understanding of how social enterprises adopt managerial practices and the subsequent, often unintended consequences involved. In addition, the processes of mutual adaptation of practice and adopting organization might also involve recursive loops since a more dominant commercial orientation might lead to the adoption of more managerialist practices which – in turn – further strengthen the market-orientation of the social enterprise. Although scholars have already pointed to processes of commercialization, marketization and managerialism in social enterprises (Dart 2004; Lee et al. 2018; Maier et al. 2016), the processes that follow the introduction of managerialist practices remain still largely undertheorized and underexplored. As our chapter elucidates to dig deeper into the dynamics that drive the mutual adaption of practice and organization enables us to develop a more fine-grained theoretical understanding of the marketization of social enterprises, its causes and consequences. Thus, this view complements the predominant perspectives on marketization which either point to opportunities or threats. Future research should empirically investigate the micro-processes at play in social enterprises adopting managerialist practices and the changes that their introduction triggers within the organization. It would thus be fruitful to explore the political dynamics involved in such translation processes in more depth. Furthermore, it would also be worthwhile to analyze how one and the same managerialist practice is adopted differently and changed and altered in different social enterprise contexts, e.g., different countries. In particular, it would be useful to conduct a comparative study in which many social enterprises adopt one and the same practice at the same point in time. Finally, this chapter illustrates the complex interplay of multiple goals in social enterprises and how an apparently small intervention – the adoption of a new practice – may in turn have far reaching consequences.

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Karin Kreutzer is Professor of Social Business and Head of the Impact Institute at EBS Universität. She published research on organizational identity and processes of marketization in hybrid organizations in leading academic journals. She serves on the board of several nonprofit organizations and social enterprises.

Chapter 9

Being for Profit, Non-profit, or Both? The Risk Advantage of Social Enterprises in the Face of Shocks Francesca Capo and Francesco Rullani

Each company’s prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders (..). A company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders. From “Larry Fink’s Letter to CEOs”, Jan 2020.

Abstract Social enterprises experience tensions triggered by the incorporation of both a commercial and a socio-environmental logic. This may threaten their functioning during ordinary times. Yet, in the face of shocks, their dual nature may prove an advantage compared to their for-profit and non-profit counterparts. Building on research on institutional logics and uncertainty, we theorize that these organizations, in view of the knowledge, resources, competencies and relations they possess in both economic and social domains, face less risk compared to for profit and non-profit organizations when shocks call them to deal with unexpected demands from both spheres. We believe such theorization could talk to literature on hybrid organizations and risk, on for-profit and non-profit organizational forms, and on ethical issues in the creation of social impact. Keywords Social enterprises · Hybridity · Risk management

F. Capo (*) University of Milano Bicocca, Milan, Italy e-mail: [email protected] F. Rullani Ca’ Foscari University of Venice, Venice, Italy e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_9

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Introduction BlackRock represents the largest investment fund in the world. On October 15th of 2019, BlackRock reported $84 billion of quarterly total net inflows (BlackRock Investor Report 2019), with a total asset of $6.8 trillion, a year-over-year increase of 8% (Morris 2019). With no doubts, BlackRock stands out as an over performing for-profit business, able to fulfill its goal of achieving economic results. As a key investor in the global economy, it also represents the reference point for financial operators, companies and institutions worldwide. In recent letters addressed to CEOs (e.g., Sorkin 2020), its founder Larry Fink highlighted the urge to focus on a growth path that is sustainable not only in financial terms, but also socially, developing what he calls “a sense of purpose” – i.e. “actions implemented to continuously be able to create value for all company’s stakeholders” (Henderson and Van den Steen 2015; DesJardine et al. 2019). Indeed, according to Larry Fink, companies must be able to face, among others, social challenges, such as, for example, climate emergency, and contribute to the welfare of a series of stakeholders, that includes not only shareholders but other actors in the society more in general. This somewhat radical turnaround in the vision of a key actor of global financial markets can be ascribed to BlackRock’s recognition that no business is detached from society. Rather, it is key to pay attention to demands that are not merely core to each own business, such as those coming from shareholders, but affect all the firm’s stakeholders. Investors as BlackRock recently started to recognize this, and to realize how critical is to embrace, alongside economic demands, issues that pertain to the social sphere that touches a wider set of stakeholders (Thompson 2019). A similar argument applies to non-profit organizations. Although their main goal is to achieve a positive social and environmental impact, the shrinking of their usual sources of funding pushed these organizations to become more and more engaged in a broad range of fundraising activities, evolving their strategies both on the side of donations (e.g., using crowdfunding) and beyond donations, becoming more open to market-based value generation (Battilana and Lee 2014). Such experimentation implies that some non-profit organizations increasingly deal, alongside social demands, with commercial ones (Battilana et al. 2012; Battilana and Lee 2014). In this chapter we seek to understand what the advantage of being hybrid organizations (Battilana and Lee 2014) such as social enterprises could be, and thus what may push for-profit businesses and non-profit organizations to become more hybrid and incorporate different demands (i.e., social and commercial, respectively). In ordinary situations, organizations may not need to deal at the same time with both social and economic demands. Indeed, they can focus on their main goal and move to the background all the rest, taking for granted the capability of usual routines and industry practices to respond to their non-core stakeholders’ demands. This need becomes however pressing in the occurrence of shocks, whose frequency and relevance seems to be growing fast and pervasively in our ever-more

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interconnected societies (DesJardine et al. 2019). Extra-ordinary events generate turbulences that propagate worldwide and result in more frequent shocks hitting the organizations in our economies (Ramus et al. 2017). Turbulences represent “difficult-to-predict discontinuities in an environment” (Haleblian and Finkelstein 1993, p. 845), which may force organizations to move beyond their usual scope and prioritize demands that during ordinary times would stand in the background (Almandoz 2012; Ramus et al. 2017). This implies for organizations employing new knowledge, resources and competencies, as well as building relationships with a broader and more heterogeneous group of stakeholders, most of the times out of their business-as-usual domains: communities, activists or public opinion for for-profit businesses; market-based providers of financial support for non-profit organizations. Due to the novelty of the knowledge, resources and competencies to be employed, and relationships to be built, the results of this effort are highly uncertain, exposing to a higher level of risk not only the organization but also its stakeholders. We argue that social enterprises may be more suited to face these extra-ordinary shocks as compared to for-profit businesses and non-profits organizations. Social enterprises are organizations that seek to address societal problems through business ventures, thus having a dual nature, social and commercial. Examples of social enterprises are work integration social ventures that provide employment opportunities to marginalized, long-term unemployed individuals (Pache and Santos 2013), and impact investing ventures, that provide debt and equity capital to social initiatives (Hehenberger et al. 2019). As such, they are born to deal every day with the dual reality of social and commercial demands (Fosfuri et al. 2016; Santos et al. 2015), and have developed knowledge, resources, competencies and relationships rooted in both realms. Even in case of extra-ordinary turbulence and the consequent shocks, these organizations would not need to adapt to a totally new domain, but could build on what they are already endowed with due to their experience. As a consequence, a social enterprise would be exposed to a lower level of risk, and so would be its stakeholders: having seen already the organization at work in both domains, they could infer more easily what courses of action it could implement to respond to shocks. In other words, when turbulences are taken into account, social enterprises come to represent a lower-risk option for investors, flipping upside-down the typical risk evaluation given during ordinary times. This is an advantage that has been largely overlooked by the current literature, and highlighting it and its consequences for theory and practice represents the main contribution of this conceptual chapter. To articulate the nature of this advantage, we structure the chapter as following. First, we build on literature on institutional logics and suggest how, in the face of shocks, for-profit businesses and non- profit organizations may find themselves in the need to prioritize goals that are not core to their functioning (i.e. social and commercial, respectively). To do this, and provide our conceptualizing illustrative evidence (Siggelkow 2007) we provide two cases in point. Specifically, these are the cases of two organizations that were inadvertently called, following a shock, to face demands that pertained, respectively, to a social and an economic sphere: the for-profit business Miteni and Search-And-Rescue (SAR) NGOs rescuing migrants

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in the Mediterranean Sea. By grounding our conceptualization into the stories of Miteni and SAR NGOs, we are able to illustrate how the shuffle in the prioritization of different logics may call organizations to face, under specific circumstances, more uncertainty compared to social enterprises, as they will not possess the resources, competencies, knowledge and relations needed to pursue new goals. Relatedly, in the second part of our chapter, we build on extant research on uncertainty to theorize that, in the face of shocks, social enterprises will possess a “risk advantage” compared to their for-profit and non-profit counterparts, and provide anecdotal evidence of such advantage, illustrating the case (Siggelkow 2007) of a specific social enterprise (the benefit corporation Patagonia) able to better navigate the uncertainty triggered by an exogenous shock. Finally, we discuss the related contributions, and articulate how this theorizing may inform literature on hybrid organizations and risk, and on for-profit and non-profit organizational forms.

Organizations and Institutional Logics In order to articulate our discussion on the “risk advantage” experienced by social enterprises compared to their for-profit and non-profit counterparts, in this section we will build on literature on institutional logics to account for the demands faced by these different kinds of organizations. Indeed, worldwide, we observe the existence of different organizational forms. Such forms include, among others, for-profit businesses, non-profit organizations and organizations that stand halfway in between as they combine commercial and social elements (i.e., social enterprises, Pache and Santos 2013; Santos et al. 2015). These organizational forms incorporate different institutional logics, namely sets of “material practices, assumptions, values, beliefs and rules” (Thornton and Ocasio 1999, p.804). Such logics shape the way organizations produce and use knowledge, the way they use their resources, exploit their competencies, build relationships and, in general, behave in order to fulfill their ultimate goal (Battilana and Dorado 2010; Battilana et al. 2015). Scholars have acknowledged that most organizations incorporate more than one logic (Besharov and Smith 2014), as they are embedded within environments imbued with different logics (Thornton et al. 2012). However, organizations may differently instantiate the logics incorporated as a reflection of the environment they live and thrive within (Meyer and Rowan 1977). Indeed, organizations may confer more or less centrality to one or another logic depending on whether they are core or peripheral to their organizational functioning (Besharov and Smith 2014; Gümüsay et al. 2019), and thus key or not to the achievement of organizational goals (Pache and Santos 2013). This means that organizations may incorporate, at the same time, both logics that are central and logics that are peripheral (Besharov and Smith 2014). As for-profit businesses’ goal is to produce economic returns and maximize the value generated for their shareholders, they incorporate as central the commercial

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logic, with activities aimed at value creation and capture. Consequently, for-profit businesses cultivate knowledge, resources and competencies, and build relationships, that rest primarily on market-based mechanisms and strategies to increase economic returns. Of course, beyond this abstraction, for-profit businesses operate in an environment whose demands are not merely revenue-driven. Indeed, many for-profit businesses engage into activities that aim at creating social impact or diminish their environmental footprint, often through Corporate Social Responsibility initiatives (CSR). However, usually such engagement rests in the background, captured by a logic that is only peripheral to organizational functioning, sometimes becoming simply instrumental to the main commercial logic (Berrone et al. 2015; Fosfuri et al. 2015). Thus, although for-profit businesses may incorporate both a commercial and a socio-environmental logic, the majority of their knowledge, resources, competencies and relationships rests in the economic domain, as their central logic is commercial. This distinction applies also to non-profit organizations, whose goal is rather to generate a positive social and environmental impact. As such, these organizations incorporate a central socio-environmental logic with knowledge, resources, competencies and relationships focused on creating value for the society in general (Santos 2012). Notwithstanding their central logic is a socio-environmental one, non-profit organizations also need to pay attention to sources of financial sustainability. Being non-profit, their economic expertise is usually very specialized in gathering donations and applying to publicly financed projects (Battilana et al. 2012; Battilana and Lee 2014), and marginally relates to market-based fundraising activities. Indeed, in non-profit organizations the commercial logic can be there, but usually with a peripheral role in the organizational functioning. Between for-profit businesses and non-profit organizations stand social enterprises, organizations that pursue both an economic and a social goal (Battilana and Lee 2014), and thus incorporate as central both a commercial and a socioenvironmental logic (Besharov et al. 2019). The centrality that both logics enjoy within social enterprises is what distinguishes these organizations from for-profit businesses that engage into CSR activities and from non-profit organizations that devote efforts to develop some market-based activities. Specifically, although for-profit businesses may implement certain activities to create social impact (e.g., tackling grand challenges) and non-profit organizations may engage into some market-based activities (e.g., fundraising) to achieve commercial goals, the two socio-environmental and commercial logics have a peripheral role in for-profit businesses and non-profit organizations respectively. However, in social enterprises, the socio-environmental and commercial logics come to be equally key for organizational functioning, central to reach organizations’ goals that have indeed both a social and commercial nature. In view of the dual logics they incorporate, social enterprises’ knowledge, resources, competencies and relationships have been found to fall in both the economic and social domain (Battilana and Dorado 2010; Pache and Santos 2013). Specifically, these organizations aim at promoting social impact and respect

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for the environment by means of economic activities (i.e. banking, production, commercialization and distribution of products, etc.). In the last decade, scholars have intensively investigated the characteristics of this specific organizational form, how it manages the challenges of pursuing these two logics (Battilana et al. 2015) and what are the advantages and disadvantages this can trigger (Battilana and Dorado 2010; Ebrahim et al. 2014).

From Ordinary to Turbulent Times: The Case of For-Profit Businesses and Non-profit Organizations In ordinary times logics that usually stand in the background do not bring about bold consequences, and organizations can keep their focus on reaching their main and ultimate goal without much risk. There is no specific need for for-profit businesses respecting laws and behaving within the boundaries of the socially accepted implicit rules of the industry to be particularly concerned about current and possible negotiations with stakeholders different from the commercial ones. Driven by a central commercial logic, for-profit businesses are thus free to invest their knowledge, resources, competencies and relationships to pursue economic goals. CSR activities become part of this effort, a means that, although strongly related to the socioenvironmental logic, is deployed to foster economic results. Moreover, for-profit businesses usually channel their efforts towards managing fruitful relationships with key stakeholders by prioritizing the economic side of each transaction, taking for granted its social side. For example, relationships with suppliers are mediated by the market, and thus focused on the price they charge, on their time to delivery, on the accuracy of the service provided. While carrying out these relationships with ordinary suppliers, a for-profit business rarely conceives them as social actors imbued with values, and even more rarely it seeks convergence of its principles and vision towards theirs. On the other extreme, non-profit organizations are driven by a central socioenvironmental logic. Consequently, their focus is on creating social impact and environmental sustainability, and thus on generating value for society and not on capturing economic returns (Santos 2012). In ordinary times, non-profit organizations acting in line with the fundraising scheme widespread in their sector of intervention do not need to be particularly concerned for their economic sustainability. In such conditions, if they consider other economic activities at all, these are usually launched only to the extent the ordinary fundraising do not suffice to support all the operations in place. Consequently, their knowledge, resources and competencies lie in the social sphere, and typically consist in significant social and human capital able to face instances of inclusion, environmental sustainability, equality, observance of human rights, and so on. In line with this, while carrying out relationships with stakeholders, non-profit organizations prioritize the values behind transactions. In ordinary times, their relationships with key external actors gravitate

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around values, principles and in general more social and environmental issues, leaving the purely commercial logic in the background. In sum, during ordinary times, both for-profit businesses and non-profit organizations invest in, and do know how to, efficiently and effectively implement their knowledge, resources, competencies and relations to reach their ultimate goals within their central logic (respectively, a commercial one for the for-profit and a socio-environmental one for the non-profit). Yet, nowadays ordinary times are the exception, rather than the norm. In recent decades the impact of extra-ordinary events grew – in terms of scale and scope – due to the establishment of a dense network of interdependencies spanning our world economy and society. In the world of globalization of commerce (Bowler 2019), global financial markets (Elliott 2019), global communication (via the Internet and related channels, McKinsey 2016), global logistics networks (The Economist 2019), global migration routes (Conant 2015) and global challenges as climate change (United Nations 2015) no actor can be considered in isolation with respect to any other actor in the system. In view of such connections, any extra-ordinary event, although minimum, may trigger turbulence that spreads throughout the whole system, suddenly hitting with unexpected shocks actors considered very far before. For example, when, in 2011, an earthquake and a subsequent tsunami caused the nuclear meltdown at the Fukushima Daiichi power plant, the stock price of alternative energy in Germany increased by the day (Ferstl et al. 2012) generating a sudden transfer of wealth from nuclear energy companies in Germany to those specialized in renewable energy (Betzer et al. 2013). Not only the shock travelled to the other side of the world in few moments hitting companies dealing with other sources of energy. It also triggered a cascade of events in Japan that led to unexpected negative side effects: Japan suddenly shut down all nuclear reactors, causing an increase in electricity prices, thus decreasing consumption also for heating, and eventually causing an “increase in mortality during very cold temperatures. . . . Estimate [s show] that the increase in mortality from higher electricity prices outnumbers the mortality from the accident itself” (Neidell et al. 2019, p. 1). In other words, in an interdependent system as nowadays world economy any extra-ordinary events, even the most far away and seemingly unrelated, would affect most actors in the system. Each organization would thus be surrounded by higher turbulence and instability, more frequently exposed to shocks than before. Moreover, governing systems with many interdependencies, with extra-ordinary events causing turbulence that propagates through the whole system, is seriously challenging (Baldwin and Clark 2000). Indeed, the subprime mortgage crisis in 2007–2009 (Jayech and Tarek Sadraoui 2011; Naoui et al. 2010) and the European Sovereign Debt crisis in 2011 (Lane 2012; Matthews 2011) made clear that current national and super-national authorities cannot control the interdependencies across national economies and societies enough to avoid severe turbulences. The recent incapability of UN Climate Change Conference (COP 25) to design policies actually able to limit the temperature increase -despite the scientific consensus, the time pressure, and the growing political protests- (Woodward and McFall-Johnsen 2019), and even more the difficulties in contrasting and limiting the spreading worldwide of

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Covid-19 provides recent evidence of this lack of control of a system whose interdependencies go well beyond the jurisdiction of one single State or even of continental authorities. The presence of a dense worldwide network of interdependencies, coupled with the absence of adequate institutions able to keep under control the effects of extraordinary events, depicts a system that is structurally turbulent. As Klaus Schwab, Founder and Executive Chairman, and Børge Brende, President of the World Economic Forum effectively summarizes: “Acceleration and interconnectedness in every field of human activity are pushing the absorptive capacities of institutions, communities and individuals to their limits. This is putting future human development at risk [. . .as] we are much less competent when it comes to dealing with complex risks in the interconnected systems that [nowadays] underpin our world, such as organizations, economies, societies and the environment” (World Economic Forum 2018, pp. 5–6). Is within this turbulent system that organizations are embedded: they are frequently exposed to shocks, in need to re-discuss taken-for-granted routines, relations, agreements and visions (Almandoz 2012; Ramus et al. 2017). The organization starts to face unexpected demands challenging the prioritization of logics and, consequently, questioning the importance of specific activities for organizational functioning (Almandoz 2012; Ramus et al. 2017). Logics that during ordinary times stood in the background may then land on the front stage, with the need for organizations to redefine priorities and goals (Battilana et al. 2015; Ramus et al. 2017). Such a turbulent system may push for-profit businesses to face also demands pertaining to their socio-environmental impact and to negotiate the meaning of their actions also with stakeholders that prioritize values and socio-environmental consequences over economic gains. In other words, shocks may push for-profit businesses to move to the front the formerly peripheral socio-environmental logic, something they have a very scatter knowledge of. Similarly, shocks imply that non-profit organizations, whose central logic during ordinary times is socio-environmental, may likely find themselves dealing also with demands pertaining to the commercial logic. They would thus need to give it a more central role, even if they have a very sparse experience of it (Ramus et al. 2017). As a consequence, in recent decades, and even more in the future, for-profit businesses and non-profit organizations may increasingly face situations that move to the fore-front logics that are, during ordinary times, merely peripheral. As such, they are called to face demands almost completely new to them. In the following paragraph we further explore this issue further by relying on two cases in point, thus providing illustrative evidence to complement our conceptualization (Siggelkow 2007). Specifically, in the next section, we illustrate (Siggelkow 2007) the case of Miteni, a for-profit business called to face, alongside commercial demands, socioenvironmental claims, thus having to deal with the deep uncertainty surrounding the newly emerged demands.

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When For-Profit Businesses Meet Socio-environmental Demands: The Miteni Case Miteni was a medium-size firm born in 1965 in Vicenza (Italy) as an R & D spin-off of the Marzotto Group, a large Italian textile industrial group with 4246 employees and 454,8 mln euros of revenues in 20171. Miteni was active since 2018 providing chemical products to firms within the pharmaceutical and agri-chemical industry. Its main products belonged to the family of PFAS (perfluoroalky and polyfluoroalkyl) carboxylic acids, very resistant substances whose effects are long-lasting and can raise dangerous consequences on human health and environment (Kounang 2019; La Repubblica 2020; Ministero della Salute 2016). In the last years, in Italy, particularly in the Veneto Region and in the area of Vicenza, PFAS contamination has spurred contestations and protests, with groups of independent citizens gathered to ask for a drastic reduction in the amount of PFAS released. Such waves of protest and push to take actions against PFAS were mainly triggered by the acknowledgment that Miteni had been tossing out for years in the related area substances that were highly polluting (i.e. PFAS related products) causing diseases to surrounding households and to its own workers, and increasing the local mortality. Under precedent properties and names (i.e., Rimar), the firm was involved in pollution episodes and related protests, but it was 2013 when Miteni publicly started to be stigmatized and charged with accusations of PFAS-related pollution. At that time, Miteni claimed for an era of transformation to begin, characterized by innovative products and the promise to clean out the surrounding area, thus trying to make up to the entire community for years of pollution released into the water and the entire environment at its expense (Zunino 2018). However, its efforts proved worthless. In 2018 Miteni files for bankruptcy, unable to face the damage caused and to recover its business. Indeed, already in the Nineties, Miteni was informed about the high level of pollution of the surrounding areas related to its economic activities (Orellana and Palma 2018). Miteni commissioned a series of environmental studies to independent consultants, received recommendations, and barely followed them. As such, Miteni proved to be unable to properly face the environmental-impact logic: it always ascribed the high level of pollution found to a previous accident causing the leakage of polluting elements in 1976, and -contrary to law prescriptions- never communicated the results of its environmental studies to the authorities (Orellana and Palma 2018). The way Miteni managed the whole issue can be ascribed to its incapability to look farther than its immediate economic goal and to take care of the social and environmental spillovers of its main business. As any other firm, initially Miteni relied on the assumption that its activities could be performed as detached from the broader effects of its actions. In these ordinary times, Miteni was prioritizing a 1

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commercial logic, thus focusing its resources and competencies around economic goals, negotiating with key stakeholders from the economic side of transactions (i.e., efficient and cheaper suppliers, reliable business partners, satisfied buyers, etc.) thus leaving on the background the socio-environmental logic governing its impact on the environment and the relationships with stakeholders (i.e., local community members). When Miteni finally was confronted with the clear evidence that it was polluting the area, it was unable to deal with the extra-ordinary environmental shock emerged due to its past refusal to properly face the socio-environmental logic. It was not endowed with knowledge, resources, competencies and relationships conducive to an effective reaction. The company struggled to strategize around domains that it had no experience of and whose related demands were usually overlooked. It reacted in isolation, trying to limit the ongoing damage and at the same time to hide the results of the investigations. When in 2016 a large screening of the local community showed evidence of pollution-related health damages, another extra-ordinary shock occurred, leading to public accusation and community protests. Also in that case Miteni was unable to face the emerging problems due to its past conduct. Indeed not only failed to manage properly -and legally- the environmental issues, but also overlooked the possible social spillovers, remaining unprepared to properly manage the new logic on the forefront and thus to respond to demands of stakeholders that did not care about economic returns, rather about pollution and health. Miteni was unprepared and thus unable to meet such social and environmental demands. The final halt to Miteni’s activities can be ascribed to its inability to look since the beginning beyond the economic realm, into the environmental and social one, to get prepared before shocks forced it to fully consider the socio-environmental logic. Miteni’s story is extreme, but its nature is far from peculiar. It is the story of a for-profit business that in a certain moment is asked to take into account the broader consequences of its core activities, to look farther than value creation for its shareholders and care for the value created for the different stakeholders. The inability of Miteni to keep up with the situation suggests that for-profit businesses may experience, in view of turbulences and the related shocks, a renewed influence of formerly peripheral logics on organizational functioning (Ramus et al. 2017), and struggle with unprecedented demands from unfamiliar domains. Miteni had to navigate a new sea of deep uncertainty. The same can be said for non-profit organizations: these may also be pushed, during turbulent times, to face shocks, and thus to deal with demands that are out of their ordinary activities. In the next paragraph we provide an illustration (Siggelkow 2007) for this as well.

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When Non-profit Organizations Meet Commercial Demands: The Case of SAR NGOs In November 2016, a Dutch foundation called Gefira publishes an article that directly accuses Search And Rescue (SAR) NGOs and Italian Coastal Guard to be colluded with smugglers and incentivize departures of migrants from Africa to Europe. In December of the same year a second article is out, accusing these organizations to be responsible of human trafficking along the same route. Luigi Di Maio, leader of the largest party in Italy at that time, accused SAR NGOs to provide a “sea taxi” service for illegal migrants (Reuters World News 2017). The allegations spurred a series of accusations (from both political parties and institutions) eventually leading to investigation into the activities and scope of several SAR NGOs operating between the coasts of Lybia, the island of Malta and the Italian and European borders. Two years later the investigations and the related trials that came to an end found that accusations were groundless (Scavo 2018). However, back then, the around 10 SAR NGOs that in about three years (between 2014 and 2017, Cusumano 2019) rescued from the sea more than 100,000 migrants who were trying to escape war and poverty by reaching the North Mediterranean shores, were invested by an unexpected wave of unprecedented critiques. Among the accused SAR NGOs, the German Jugend Rettet was one of the first concrete targets. In the midst of escalation of critiques moved by public opinion and institutions, Jugend Rettet found itself accused of “trafficking humans” rather than “searching and rescuing them” as per its own mission, and seized of its main asset, the ship Iuventa. Notwithstanding the organization had declined all accusations, in 2018 the Italian Court has confirmed the seizure of Iuventa, leaving Jugend Rettet with no room to maneuver. The story of Jugend Rettet and the shadow of doubt casted around the behavior and actual interests of many NGOs triggered a legitimation crisis. The institutional environment around them changed. “Hostility to SAR [Search And Rescue] NGOs culminated in the summer of 2018, when Italy declared its ports closed to all foreignflagged vessels . . . Until August 2017, however, NGOs could rely on a more permissive legal and political environment . . . Thanks to its feasibility and limited costs, maritime SAR proved financially viable even for small, newly established charities” (Cusumano 2019, p. 241). Initially, many SAR NGOs could rely on fundraising mainly via crowdfunding (Zandonini 2017) that however implied a rather shallow and episodic relationship with their many -but scattered and almost anonymous- donors. Only part of them reached out to institutional funds (Cusumano 2019)2. At that time, this model could work because funding was triggered precisely by the humanitarian crisis and the SAR NGOs’ effort to avoid it.

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The SAR NGOs linked to large NGOs such as Save the Children and Médecins Sans Frontières could rely also on strong institutional relationships (Cusumano 2019).

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As a consequence, when the legitimation crisis exploded, the amount of donations devolved to these organizations decreased (Anfossi 2017).3 The Dutch SAR NGO Boat Refugee Foundation was among the first in November 2017 to suspend operation also due to insufficient funds. Whereas few months before the same image of migrants risking -and sometimes losing- their lives was able to shout out for rescue and positively move stakeholders’ attention, now it became carrier of negative feelings, with SAR NGOs abruptly finding themselves striving to get the funds needed to manage their operations and activities (Grignetti 2018; Ziniti 2018). The sudden loss of legitimation, the higher costs implied by the new unfavorable institutional environment and the questioning of the motives and behaviors that spurred in the public discourse on migration, hit them as a shock. From that moment onward, the involved non-profit organizations needed to widen the set of different sources of financial sustainability, and thus to elaborate new ways to approach fundraising beyond those applied during ordinary times (i.e., crowdfunding, and possibly grants). But that was very challenging: their lack of familiarity with the logic behind different economic considerations made difficult to walk any other paths but those paved by the socio-environmental logic. SAR NGOs devote the majority of their effort to fight the narrative that obfuscated their legitimation and shied donors away. It was very difficult for them to imagine how to open new opportunities for financial support because to do so they would have had to activate knowledge, resource, competencies and relations they simply had very sparse experience of. As a consequence, many SAR NGOs had to suspend their operations not only due to restrictions to their operations, but also due to lack of funds (Cusumano and Pattison 2018). The inability of SAR NGOs to accommodate for the unexpected economic task of finding new sources of funding, i.e., for the need to move the commercial logic under the spotlight (for example by extending or linking their activities to the work of cooperatives operating after rescues at sea), suggests that, in the face of shocks, also non-profit organizations may struggle when unprecedented demands from unfamiliar domains emerge. Indeed, also SAR NGOs had to navigate a new sea of deep uncertainty.

Facing Uncertainty and Risk: The Consequences of Shocks for Non-profit Organizations and For-Profit Businesses Miteni and SAR NGOs are examples of organizations that, unexpectedly, needed to deal with unfamiliar demands raised by the shift of a logic from the background to the forefront. Such need was the result of two conditions. First, the fact that organizations incorporate several logics with different levels of influence on

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NGOs with an explicit political stance against the back-then ruling party faced the opposite effect, attracting more donations as their opposing political adversaries attacked them.

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organizational functioning (Besharov and Smith 2014). Second, the increasing turbulences surrounding organizations, that pushes organizations to move peripheral logics to the fore-front and engage into activities and practices in unfamiliar domains, for which they have no knowledge, resources, competencies, and relations to reach goals whose achievement was given for granted in ordinary times (Almandoz 2012; Ramus et al. 2017). These two conditions set for these organizations a scenario of great uncertainty, known in the literature as Knightian Uncertainty. The book “Risk, Uncertainty and Profit” by Knight (1921) is considered to be a seminal piece in studies of uncertainty. The stream of literature spurring from Knight’s insight distinguishes different kinds of uncertainty. In the first kind of uncertainty, we can depict a future scenario simply relying on a known probability distribution. Under these circumstances, possible outputs range within boundaries of the space of events x 2 X, each described by its probability p 2 [0;1], for which decision makers have information about. This is the type of uncertainty actors may most easily face as, in this case, they can move knowingly in a future described by the function p¼f(x). They can easily decide using the tools developed within the tradition of the Von Neumann-Morgenstern Theorem (Von Neumann and Morgenstern 1953), possibly emended by more realistic behavioral assumptions (Kahneman and Tversky 1979). The second kind of uncertainty is also characterized by a probability distribution that is, however, unknown. This means that actors would need to set up experiments and trials to forecast the likelihood of each possible event x (Sarasvathy 2001) reaching an estimate of p equal to ḟ(x). This new function can then be used to take decisions in the same fashion as in the first kind of uncertainty, even if only for large samples estimates can be reliable enough to equate the two kinds of decision-making processes. This last kind of uncertainty thus entails more empirical challenges that the first, but it is not the more difficult kind of uncertainty decision makers may face. When uncertainty implies the impossibility to know the probability distribution over the events’ space, so that “agent's beliefs are captured not by a unique probability distribution ... but instead by a set of probabilities, any one of which could be the true distribution” (Mukerji 1998, p. 1208. See also Beissner and Riedel 2019 for an application), we face the highest level of uncertainty. This is what Knight, and more recently other scholars, call “true uncertainty” (Sarasvathy et al. 2003, p. 144). This third kind of uncertainty poses the greatest challenge for decision makers as they are forced to act into a future scenario for which they have no specific ‘formula’ to deal with. The three kinds of uncertainty have been also distinguished by scholars into two categories: risk and uncertainty (Alvarez and Barney 2005; McKelvie et al. 2011). If the distribution of future events is either known or appraisable by actors, the literature has referred to as “risk”. When the probability distribution cannot be known, research has specifically referred to as “uncertainty” or “ambiguity” (Mukerji 1998). Risk entails for actors the probability that some event may come between their behaviors and their goals. They may thus consciously undertake risk,

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trying to prevent losses by including a measure of it in the equation linking behaviors and goals. This perspective is applied not only by decision makers aimed at reaching certain goals, but it is also true for their stakeholders. In the case of actors such as organizations for example, it becomes clear that there may be a series of stakeholders (e.g., investors) evaluating them, their behavior and their ability to reach their goals considering certain conditions and certain risk. When risk becomes uncertainty, there are two consequences for organizations. First, they will find themselves thrown into unexpected and unknown waters, relying on scarce or no knowledge, resources and competencies about how to navigate them. This situation may of course affect their ability to reach their goals and may eventually result in losses or inability to survive. Second, and consequently, the organizations’ stakeholders will be less likely to rely on them or willing to invest in them (Ahlers et al. 2015). Specifically, this may happen as stakeholders will have no information about whether the organizations will be able to manage such situation of uncertainty, whether they will have the resources and competencies to do so, and what strategies they will apply. When for-profit businesses and non-profit organizations navigate turbulent environments, they are called to deal with demands that are out of their business-as-usual activities, demands that result in situations of true uncertainty (Davis et al. 2009; Ramus et al. 2017). In the examples of Miteni and SAR NGOs, extra-ordinary events triggered shocks that shifted one peripheral logic to the fore, generating demands that could be answered only employing very unfamiliar knowledge, resources, competencies or relations. As a consequence, Miteni and SAR NGOs had serious difficulties in taking key decisions relative to domains they knew only approximately: in those domains they had no real awareness of the events ahead, let alone any probability distribution about them. In sum, shocks imply the need for organizations to deal with the true uncertainty coming from a domain they were taking for granted before, posing serious challenges to their survival. These challenges are magnified by the higher uncertainty faced also by the organizations’ stakeholders, that -in the inability to foresee what possible responses organizations could give- may shy away from them, halting their investment or support (Ahlers et al. 2015). But that is not true for every organization. While for-profit business and non-profit organizations may likely fall into this case, we claim that such challenges may be milder when shocks due to extra-ordinary events hit an organization that is neither for or non-profit, rather a social enterprise. In the following paragraph we put forward this idea.

Managing Shocks: The Case of Social Enterprises The two cases of Miteni and SAR NGOs have shown that for-profit and non-profit organizations may, in the face of shocks, be called to deal with demands (socioenvironmental and commercial, respectively) that stand out of their ordinary domain.

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As such, we have theorized that these two kinds of organizations may, under these circumstances, face deep uncertainty. To complete the picture, however, we need to consider that in the range between pure for-profit businesses and pure non-profit organizations, stands another form of organization, i.e., social enterprises (Battilana et al. 2015; Mair and Marti 2006). This kind of organizations do not merely focus on one goal (generating profits vs. creating social impact) rather pursue a dual objective: creating, at the same time, both economic and social value. As such, they incorporate as central both a commercial and a socio-environmental logic (Smith et al. 2013; Besharov and Smith 2014). In ordinary times the need for social enterprises to manage both logics and keep up with both a commercial and socio-environmental side without the possibility to focus on one, as pure for-profit businesses and pure non-profit organizations do, may constitute a burden for the organization (Santos et al. 2015). For example, social enterprises may incur into sharp tensions between individuals pursuing the different logics of economic and social nature (Battilana and Dorado 2010). This is because, within social enterprises it is not possible to move to the background one or the other logics, as both the economic and social dimensions are equally part of the organizational identity (Battilana and Lee 2014). Under these circumstances, social enterprises may be particularly fragile in ordinary times (Ebrahim et al. 2014; Smith and Besharov 2019), in need, for example, to hire appropriate human resources (Battilana and Dorado 2010), apply specific organizational practices (Mongelli et al. 2017), processes (Battilana et al. 2015) or frames (Lee et al. 2018), and to deploy business models that have an impact, but are also actually financially sustainable and can survive over time (Tracey and Owen 2006; Santos et al. 2015). When extra-ordinary shocks hit, all organizations – and thus also social enterprises- receive stimuli from all sides, both economic and social. As seen, for-profit businesses and non-profit organizations struggle when asked to take a significant step into social and economic territories, respectively, as they need to face a situation of true uncertainty. However, social enterprises are already acquainted with both realms, and also with the combination of them. In the face of shocks caused by turbulences, social enterprises are more equipped compared to for-profit businesses and non-profit organizations to deal with demands pertaining to both the social or the economic domain. They are also more accustomed to deal with the potential tensions triggered by the need to manage a dual goal, and thus are better prepared to face crises that call into action social issues alongside economic ones. Consequently, social enterprises do not act in true uncertainty even during turbulent times. The demands triggered by the shocks all belong to a known territory. The space of possible events and of their probabilities -albeit blurred by shocks (Ramus et al. 2017) - is much more familiar for these organizations than in the case of for-profit and non-profit ones. What for these latter is considered uncertainty, may easily become risk in the case of social enterprises.

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When Uncertainty Becomes Risk: Patagonia Patagonia, founded in 1972, commercializes high-end outdoor apparel products. Since its foundation, this organization has been committed yet to profit generation, but also to environmental improvement, thus pursuing a dual economic and social mission. Indeed, the firm became a benefit corporation (or B-corp, Hiller 2013) precisely to reinforce this commitment: B-corps indeed “are legally required to consider the impact of their decisions on their workers, customers, suppliers, community and the environment” (Bcorporation.net). Patagonia’s focus rests both on quality and innovation, and on environmental impact. Notwithstanding the efforts deployed by the organization to develop several benefit purposes (in line with its B-corp nature) and to create, at large, social impact (in line with its social enterprise nature), in 2011 – following a more detailed internal audit into its Taiwan suppliers that the organization itself commissioned – Patagonia was accused of human trafficking and exploitation (White 2015). The accusations stemmed from discovering that Patagonia’s second tier suppliers (i.e., mills that transform raw materials into elements that eventually build up the final product) were exploiting a practice that was very diffused in Taiwan: “labor brokers”. The recruitment of people working for the mills was not happening through a direct call, rather it was managed indirectly through “labor brokers”, who use to ask workers for excessively high fees to be recruited for the mills, also confiscating their passports and thus trapping them into the system. Although the discovery of such human exploitation left Patagonia bewildered, it did not leave the organization unable to react properly. This extra-ordinary shock called Patagonia into dealing with an unexpected social issue, deploying knowledge, resources, competencies and managing relations to negotiate with stakeholders that were advocating human rights, appropriate working conditions and in general a commitment to values that pertained to the social sphere, rather than the economic one (Clucas 2015). Under these circumstances, for any organization whose primary goal is to gain profits and whose primary knowledge, resources, competencies and relations fall into an economic domain, managing the demands spurred by Patagonia’s internal audit would be, at best, problematic. However, as theorized, shocks caused by turbulences would not shove social enterprises into true uncertainty, but estimable risk, where possible strategies and events can be identified to a large extent, and it is possible to have a sense of their probability distribution, facilitating a quick and effective response to the crisis. Immediately after the internal audits’ release, Patagonia took several steps to face the social issue it was accused of (White 2015). First of all, it partnered with an NGO whose aim was to grant people all around the world fair and respectful working conditions (Hensel 2015; Patagonia Blog 2015), in a way to develop a comprehensive working standard to be applied not only in Taiwan factories but all over the other manufacturing and distribution sites. Second, it mandated the repayment of workers that had to incur into excessively high fees to grant themselves a job at the mills. Third, it engaged into negotiation with the Taiwan’s Ministry of Labor

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Workforce Development Agency, setting up a training program led by the agency itself to teach suppliers how to implement direct hiring, without having to rely on “labor brokers” anymore. Fourth, it shared its actions and its knowledge about how to prevent human trafficking in supply chains in a Forum organized by the White House and participated by many other organizations that could thus learn from Patagonia’s experience and propagate its solutions to an industry-wide problem (Casadesus-Masanell et al. 2010). The steps taken by Patagonia demonstrated true commitment towards the issue, the ability to appropriately manage the challenge at task and to smoothly renegotiate with interested stakeholders. In view of its knowledge of the social domain and its everyday efforts in engaging with stakeholders belonging not only to the economic, but also to the social sphere, Patagonia was able to navigate the challenges posed by an extra-ordinary shock. In doing so, Patagonia had an advantage compared to any other for-profit businesses that could have been called to face social demands. Also, in this way, the organization was also able to show external stakeholders its reliability under unexpected conditions. Indeed, Patagonia was experiencing risk rather than uncertainty, thus exposing stakeholders to lower levels of uncertainty. Under these circumstances, Patagonia, was better off and possibly worthier to invest in than any comparable traditional for-profit business. In a similar vein, Patagonia was also called to deal with extra-ordinary economic demands. In 1992, in line with its environmental goal, the company decided to start using organic cotton in its productions. Such decision was triggered by the acknowledgement of the dangerous effects that conventional cotton may cause in environmental and social terms (Holmes 2009). Patagonia’s choice turned out to be a very challenging one, particularly from an economic standpoint: the shift to organic cotton determined an increase in costs, a decrease in product variety (indeed Patagonia had to reduce its product line of around 30%), and spurred complaints from suppliers who had no experience in managing organic cotton and found it costly compared to the conventional one (Perella 2016). However, Patagonia, being a social enterprise, had the knowledge, resources, competencies, relationships to deal successfully with the extra-ordinary economic demands triggered by this shift. As explained in an interview by Rob Bondurant (at the time, Patagonia director of global marketing), the organization was able to persuade its suppliers (also by providing them subsidies) to go organic, and to convince their customers that buying their products was worthy notwithstanding the higher price (Holmes 2009). This was possible as Patagonia was born to talk both languages, the economic and social one, and thus was more prepared to face instances coming from both logics even when challenging and unexpected. Where Miteni and SAR NGOs, being focused on a single goal and mainly overlooking other logics, were unable to deal with the unfamiliar demands triggered by shocks, Patagonia proved able to navigate such turbulence, decreasing the risk exposure of its investors.

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The Risk Advantage of Social Enterprises The case of Patagonia shows that, due to the centrality it granted to both a commercial and a socio-environmental logic, social enterprises show a favorable risk profile, in the face of extra-ordinary shocks, if compared to for-profit businesses and non-profit organizations. Scholars have suggested that in ordinary times, social enterprises may incur into several challenges (Santos 2012). As mentioned, they have to manage conflicts deriving from multiple logics (Battilana et al. 2015), for example showing “structural flexibility” – bundling fixed organizational elements with more dynamic processes – in navigating both their different identities (Smith and Besharov 2019), or by deploying activities and practices that selectively match elements of both social and commercial demands (Pache and Santos 2013). Notwithstanding social enterprises face challenges during ordinary times (Besharov et al. 2019), in the case of extra-ordinary shocks the disadvantage due to their double bottom-line may become an advantage. Indeed, we suggest here that social enterprises may be characterized by a “risk advantage” with respect to for-profit businesses and non-profit organizations. The reason of this advantage is that extra-ordinary shocks – whose frequency is ever-growing pushed by the higher turbulence of our global economies – are likely to trigger demands pertaining to both a commercial and a socio-environmental logic (Ramus et al. 2017), forcing for-profit businesses and non-profit organizations to deal also with those pertaining to a logic they have left in the background in ordinary times. These demands appear very unfamiliar to them, sinking these organizations into the waters of true uncertainty. Social enterprises, instead, do not face the same type of uncertainty. Incorporating a commercial and a socio-environmental logic as central, they have already dealt with both, and are equipped with knowledge, resources and competencies pertaining to both. Moreover, they have relationships that span the two domains, and have thus the ability to negotiate with stakeholders that belong to the two sides. Thanks to this equipment, social enterprises can acquire a sense of the possible events ahead and of their probability, and design strategically possible courses of action. The lower uncertainty experienced by social enterprises around how to behave in the case of extra-ordinary shocks in turn affects how external stakeholders (e.g., investors) perceive these organizations. External stakeholders know that social enterprises are endowed with an equipment that allows them to knowingly navigate different demands triggered by the shocks. External stakeholders have witnessed their behavior in the past, know their vision and mission in both economic and social domain, and can refer to their proved values, principles, and culture to imagine their possible courses of action. This suggests that external stakeholders may have a sense of the probability distribution of these courses of action. The space of future events they face is thus much less blurred than in the other cases. Seen under this light, investing in social enterprises may appear to them as a less risky option, as they will be able to guess the range within which decisions could potentially fall even in the case of extra-ordinary shocks. While shocks shove for-profit and non-profit organizations

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into true uncertainty, they just represent manageable risk for social enterprises and their stakeholders. We believe this theorization may contribute to literature on hybrid organizations and risk, on for-profit and non-profit organizational forms and on ethical issues in the creation of social impact First, our idea speaks to extant research on hybrid organizations (Battilana et al. 2017; Gümüsay et al. 2019; Smith and Besharov 2019) and, in particular, on hybrid organizations in the face of turbulent times (Almandoz 2012; Ramus et al. 2017; Vaccaro and Palazzo 2015). Recently, scholars have investigated the consequences of shocks for hybrid organizational functioning, acknowledging the need to combine mechanisms of collaboration and formalization in order to successfully deal with the new tensions engendered by the shock (Ramus et al. 2017). However, in this chapter, we propose a wider angle from where to look at the challenges and consequences for hybrid organizations in the face of shocks. Such angle embraces, together with hybrid organizations, also purer forms of organizing, namely for-profit businesses and non-profit organizations. While when hit by extraordinary shocks hybrid organizations may, in absolute terms, experience exacerbated tensions and conflict in view of their dual nature (Ramus et al. 2017), in relative terms their dual nature may allow them to respond better than for-profit businesses and non-profit organizations. This means that, when considering hybrid organizations as part of a broader system composed by several different actors, we can acknowledge the risk advantage these organizations may have during turbulent times. We believe this may be key, in that it suggests the need to apply a comparative view, rather than focusing on one single organizational form in isolation. When seen from this angle, hybrid organizations may reveal unexpected features, and hidden organizational and strategic advantages that go beyond the fact that, together with economic returns, they also strive to generate a positive impact in the society. This brings us to our second contribution. Literature on hybrids has acknowledged the challenges triggered by the incorporation of different logics (Battilana et al. 2017; Smith and Besharov 2019), also exploring the potential risk of unbalancing these latter, eventually determining a “mission drift” (Ebrahim et al. 2014). The perspective of risk that derives from such investigations is an internal one, focused on the possibility that, within the organization, tensions between constituents of different logics may hamper the achievement of their goals (Battilana and Dorado 2010; Greenwood et al. 2011), in some cases drifting them away from their main purpose (Jones 2007; Ebrahim et al. 2014). However, hybrid organizations, as other organizations, also face a component of risk that is external. This component is intrinsic to the interaction between the organization and the system it is part of, and whose occurrence is triggered by causes that are independent from the organization itself. Because of the higher number of stronger interdependences in the global economic and social system, extra-ordinary events that before limited their effects to the directly involved actors and their closer connections, may now trigger much wider effects. Widening the reach of the shocks induced by extra-ordinary events implies a higher exposure of any organization to these shocks. In other words, organizations are now immersed in a much higher turbulent system than before, and may more frequently find themselves dealing with unexpected shocks bringing with

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them demands that pertain to different realms, economic and socio- environmental. We argued that, in view of their knowledge, resources, competencies and relationships in both domains, the possibility that such demands threaten the achievement of organizational goals is lower for social enterprises compared to their for-profit and non-profit counterparts. This means that, under a perspective that is systemic, hybrid organizations have, in relative terms, a risk advantage, that may balance -and sometimes even overcome- their higher internal risk. Such reasoning applies not only to organizations, but also to outside investors. Social enterprises know how to face both economic and social instances. Hence, when shocks call to deal with demands from both domains, their behavior is not truly uncertain, as it happens for for-profit business and non-profit organizations, but somehow predictable, subject to computable risk. In other terms, investing in social enterprises may constitute a less risky option, in relative terms. To our knowledge, these are insights that scholars have, up to now, overlooked, yet they may suggest conditions under which social enterprises become an attractive alternative both for entrepreneurs to start with and for investors to rely on. We also believe our argument goes beyond the literature on hybrid organizational forms, and speaks to research on innovation, finance and strategy (Cattani 2005, 2006; Black and Scholes 1973; Bowman and Hurry 1993). We know from scholars in innovation literature that technological development may be the result of the ability to accumulate knowledge non-related to firm’s existing applications, and to leverage it in the face of new environmental conditions favoring its exploitation. Such ability is referred to as technological pre-adaptation (Cattani 2005, 2006), and suggests how knowledge in one domain can prove a useful tool in the face of unexpected environmental conditions that unpredictably render such knowledge valuable for other domains. This means that there exists an intrinsic value in accumulating knowledge in one specific domain that may, or may not, become exploitable in otherwise unthought-of domains or situations. In other words, the idea of technological pre-adaptation proposes that organizations, in general, may profit from accumulating knowledge whose potential may not be fully exploitable in ordinary times, rather become key to be leveraged on in the face of new and possibly unexpected environmental conditions. In a similar vein, we theorize that for-profit businesses and non-profit organizations may invest into the development of knowledge, resources, competencies and relations in domains that, although not core in ordinary times, may prove pivotal in case of changes in the environment. This means that for-profit businesses and non-profit organizations may be better off if they invest in the social and commercial domains, respectively, also in ordinary times, reinforcing their vision, culture, mission, strategies and activities not because that is needed in that moment, but because it may be needed in the future. In this way they can become ready to adapt when exogenous factors call for it. The possibility to invest in a bundle of knowledge, resources, competencies and relations not currently necessary with the aim of exploiting them at due times represents, for for-profit businesses and non-profit organizations, a real option to be exercised (Cattani 2005, 2006). Scholars in the field of finance (Black and Scholes 1973) and strategy (Bowman and Moskowitz 2001; Oriani and Sobrero

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2008) have extensively investigated the process and consequences through which organizations may secure themselves the right to make (or not) some specific strategic move through the concept of real options (Bowman and Hurry 1993). The literature has acknowledged how valuable can be for organizations, in the face of uncertainty, to grant themselves the possibility to undertake certain actions, eventually gaining competitive advantage (Merton 1998; McGrath et al. 2004). We put forward the idea that, for for-profit businesses and non-profit organizations, nurturing a logic that usually stands in the background (i.e. a socio-environmental and a commercial logic, respectively) may buy the real option of exploiting such knowledge, resources, competencies and relations in the future, an option that may be worth to be exercised in the face of the more frequent shocks of nowadays turbulent times. Also, relatedly, we believe our theorizing may inform literature on organizational resilience (DesJardine et al. 2019). Scholars have found that, during times of crisis, organizations may be more resilient by deploying strategic (long-term) social and environmental practices (DesJardine et al. 2019). Indeed, these practices help the organization meet the diverse need of a wider range of stakeholders, spurring connections with actors outside the immediate organization’s sphere and eventually building an environment that is more stable and resistant to shocks. We complete this view centered on improving the stability of the local ecosystem mobilized by the organization, with a view focused on the organization’s capability to navigate a shock on the basis of its very characteristics, such as knowledge, resources, competencies and relations. Our point is that, when such bundle is the result of the incorporation of a logic (i.e. its goals, values, practices) that transcend organization’s ordinary aim (e.g. for for-profit businesses and non-profit organizations, generating revenues and social impact, respectively), it allows the organization to be better prepared to adapt to shocks, becoming more resilient. Applying this angle, resilience is not due to the creation of a more stable local environment, but it is fostered within the organization, by improving its adaptability. This is obtained by a strategy that is consistent with -but deeper and wider than- the adoption of strategic social and environmental practices. It comes as a consequence of nurturing and developing a logic that is not core to the ordinary organizational functioning. Embracing a logic cannot be realized only instrumentally. It implies leveraging not only on logic’s material elements (i.e. practices) but also on its more ideational elements (Kroezen and Heugens 2019), investing in goals and values belonging to a domain that is not core to the business-as-usual activities. Thus, the organizational change it implies is much deeper and wider, generating more commitment and irreversibility than social and environmental practices, even when these are strategic. Marrying a new logic, and thus becoming more hybrid, is thus a different leverage firms may use to respond to turbulence, complementary to the construction of a more stable local ecosystem (DesJardine et al. 2019). Finally, our insights may inform the ethical debate that is gaining momentum among management scholars (Bull and Ridley-Duff 2019; Ramus et al. 2020). Indeed, ordinary times may allow for a sounder consideration of stakeholders’ ethical expectations, enabling both for-profit businesses and non-profit organizations

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to more carefully plan and act around the ethical issues raised by their key stakeholders, i.e., those revolving around their main logic. However, emerging shocks may push for-profit businesses and non-profit organizations to face new ethical concerns associated with the new stakeholders, those pertaining to the since-then marginal logics, social and commercial respectively. This can likely jeopardize their ability to meet the different stakeholders’ systems of values and moral principles, and thus generate a series of negative effects on those relationships and partnerships. In view of the resources, knowledge, competencies and relations they possess, when called to respond to both the commercial and social realms, social enterprises appear more equipped to recognize and meet the divergent sets of values and moral principles that guide commercial actors on one side, and social actors on the other, diminishing the ethical concerns of all kinds of stakeholders in the first place. We would like to conclude our discussion signaling that the intuition we provide in this chapter may also be that part of the reasons why Larry Fink claims it is about time that investors and companies consider the social and environmental consequences of their behaviors. The CEO of the largest investment fund in the world may have likely identified the risk advantage we put forward in these pages. Indeed, in his letter to other CEOs, he states “our investment conviction is that sustainability – and climate-integrated portfolios can provide better risk-adjusted returns to investors”. This means that pushing companies to serve a social purpose is not only morally “the right thing to do”, but also a way to shed light on the real determinants of the risk profiles of investment options. We will never be able to know if this was part of Fink’s worries while crafting the letter. But in all cases, the link we suggest provides social enterprises with a possible fruitful narrative to engage investors like BlackRocks, increasing their chance of getting funded, and decreasing the level of risk of the whole economy we live in. A good result, nevertheless.

Perspective for Future Research Our idea that social enterprises may be endowed with a risk advantage compared to their for-profit and non-profit counterparts paves several avenues for future research. First, risk, although key in firms’ performance and survival, constitutes, for scholars with an interest in social enterprises and, more in general, in hybrid organizations, an overlooked area of investigation. In this sense, we believe this chapter may encourage further theoretical studies in this field and spur empirical investigation aiming at both quantitatively measure the amount of risk experienced by these different organizational forms and qualitatively dive into the mechanisms and processes that trigger such advantage. Second, our chapter positions itself into the stream of research that looks at the “bright side” of hybridity. Whereas, in the last decades, we have witnessed a peak of scholarly contributions dwelling onto the challenges and tensions experienced by hybrid organizations, thus focusing on the “dark side” of hybridity (i.e., the negative consequences it may trigger and arrangements to avoid or cope with those), more

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recently, literature has proposed that these organizations may be an arena of innovation, spurring creativity in view of the novel combinations the incorporation of different logics may trigger (Jay 2013; Durand et al. 2013; McPherson and Sauder McPherson and Sauder 2013). Indeed, this stream of research has pointed to advantages that go beyond the positive impact hybrid organizations may have on the society, and looks at advantages that are rather more intrinsically related to their performance. Our chapter goes in this direction, and urges scholars in the field to explore the “perks of being a hybrid”, what benefits may accrue to firms that combine different logics, whether these benefits may overcome the related costs these organizations may incur in while trying to balance the priorities of different constituents, and what are the boundaries conditions for such “bright side” to be unveiled. Also, our chapter calls for a deeper dive into the complex interactions that characterize the market and social domains. Nowadays, the market and social domains are mostly interpreted in terms of a dichotomy between firm’s survival and societal change, where the market is depicted as a mechanism merely aiming at generating financial resources and the social domain is the realm of value creation for the majority, of attention to the environment and humanity emancipation in general. Specifically, the market comes to be instrumental to provide for social impact, a necessary “bad” for positive changes in society. In our chapter we provide for a more complex, intricate relationship between the two domains. Recent research has pictured the market as “much more than a simple mechanism to fuel [social enterprises’] finances” (Mongelli et al. 2019, p. 302) claiming its importance in providing appropriate incentives to create scalable social impact. Indeed, market may spur mechanisms of self-confidence, competition and rewards able to boost social impact towards results that would not otherwise being attained. This is, for example, the case of convicts employed by WISEs (Mongelli et al. 2018), whose levels of self-confidence and inner strength come to be fostered by the role they play in the production of goods and services to be sold on the market. Under these circumstances, market becomes a mechanism to positively transform the selfperception these disadvantaged workers have. This means that the market is not to be merely conceived as the antagonist of social impact, as it can rather favor it, being a fly-wheel of positive social consequences. In a similar vein, we highlight that also organizations centered on the social domain per their own identity may be incorporating much more than social-impact benefits, and rather provide its stakeholders with significant economic value. Future research may thus explore the mechanisms underlying the complex relationship between the market and social impact, and investigating the potential of such combination to mitigate large-scale problems and address great challenges, at the same time acknowledging the ethical implications of reaching such ambitious goals and identify possible solutions to related ethical dilemma that may arise Finally, further avenues for perspectives may be walked in the direction of literature on learning. Indeed, our chapter moves from the assumption that some organizations are -or not- endowed with both a commercial and socio-environmental logic, and are born -or not- able to exploit this combination to its full potential.

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However, scholars may be interested in understanding the process beneath such endowment and ability (i.e. how organizations may learn to hybridize, what are the steps that mark the path from incorporating one logic to be able to embrace different logics), an ability that we wish for our nonprofits and for-profit organizations to develop before hitting the storm. Acknowledgements We thank Riccardo Maiolini, Luca Mongelli and Pietro Versari for their support in the initial phase of this work. We thank the editors and an anonymous referee for their suggestions.

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Francesca Capo is an assistant professor at University of Milano Bicocca. Francesco Rullani is a professor at Ca’ Foscari Univresity of Venice.

Chapter 10

Scaling Enterprises: A Critique and Opportunity Clodia Vurro and M. Tina Dacin

Abstract Scalability in social enterprise, defined as the ability to expand and adapt its reach to better address the magnitude of a social need or problem more effectively, with the aim of maximizing social impact, still represents a controversial issue. With the aim to advance our current understanding of scalability in social entrepreneurship, we theorize on an embedded view of scaling social impact where decisions about how to scale depend on the extent to which a social enterprise is both context and resource embedded. We show that while context embeddedness is of crucial importance in determining which strategy is chosen, resource characteristics provides the organization greater discretion to experiment and capitalize on emergent growth opportunities. Keywords Social enterprises · Scalability · Social impact

Introduction Over the last decade, social enterprises, broadly defined as organizations that seek to address the most complex problems of society through business ventures (Dacin et al. 2011; Perrini and Vurro 2006), have increasingly captured scholarly and practitioner attention. Despite heterogeneity due to the idiosyncratic nature of social problems, having a dual nature, social and commercial, is what makes social enterprises unique (Hehenberger et al. 2019; Pache and Santos 2013). An oftenunstated specification derives directly from the statement above. Social enterprises start with the identification of an opportunity to enhance and sustain societal wellbeing, by providing a viable solution that – at least partially – has the potential to C. Vurro (*) Department of Economics, Management, and Quantitative Methods, University of Milan, Milan, Italy e-mail: [email protected] M. T. Dacin Queen’s University, Smith School of Business, Kingston, ON, Canada e-mail: [email protected] © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_10

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solve a locally-bounded social problem. In so doing, social enterprises share empathy for the plight of potential beneficiaries and are human-centered, that is, close to the very institutional, cultural or behavioral roots of the problems they decide to address (Zahra et al. 2009). Yet, the effectiveness of a social enterprise to meet its mission is intrinsically linked to its social value potential, that is, the potential for maximizing social change well beyond its original boundaries through scalability (Perrini et al. 2010; Seelos and Mair 2017). Scalability in social entrepreneurship is defined as the ability to expand and adapt a social enterprise’s reach to better address the magnitude of a social need or problem more effectively, with the aim of maximizing social impact (Dees 2008; Desa and Koch 2014). Hence, “scaling what works” is perceived as the most effective and efficient way to amplify social impact (Bradach 2010; Dees et al. 2004). Indeed, it is not by chance that the topic of scaling has garnered great importance in the field of social entrepreneurship, as social entrepreneurs struggle with the ethical challenges of balanging care of the beneficiaries with standardization to ensure a more efficient use of resources and the attainment of a larger scale. The risk of diluting the level of care and incurring in mission drift or loss of authenticity are among the most debated ethical issues related to scalability (Kent and Dacin 2013; Lawrence and Maitlis 2012). On the one side, scholarly literature and practitioners in the field converge on considering scaling as both a moral and a normative imperative. According to this perspective, the prominence of social value creation is emphasized (Dacin et al. 2011; Mair and Martì 2006), such that the inability to achieve any appreciable scale is considered a moral failure to the extent it threatens the potential to tackle complex social problems more effectively, that is, ameliorating as many lives in as short time as possible (André and Pache 2016; VanSandt et al. 2009). Moreover, it is widespread among resource providers and intermediaries targeting social entrepreneurship to include attitude to scale as a key normative prescription in the due diligence process, making scaling a necessity to have access to critical resources and assets. For example, Ashoka, a global association supporting and investing in social entrepreneurs to help them maximize their impact on social change, explicitly focuses its selection process on a combination of innovativeness of the idea and the related potential to produce nationwide changes and revolutionary institutional reforms. Similarly, Acumen Fund, a social venture capital fund supporting pioneering entrepreneurs in the provision of critical social services (e.g., water, health, housing and energy) to vulnerable populations, commits capital investments to entrepreneurial ventures having as an objective of reaching approximately one million end users within a five-year period with the benefits of the product or service offered. As shown by the examples above, scaling is mostly considered as an important criterion by donors and supporters who are obsessed by high social returns on their investments (Bradach 2003). On the other side, supporters of an anti-growth case dampen enthusiasm for the scalability imperative, emphasizing the risks of diluting the authenticity of the social

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mission by giving priority to mere operational targets over preserving the quality of the relationships with beneficiaries, the capacity to experiment, and the ability to be flexible in relation to local contexts (Edwards and Hulme 1992; Uvin et al. 2000). Critiques to scaling also move from observing the apparently contrasting behavior by funders and resource providers targeting social entrepreneurship. In fact, while including scalability as a leading criterion in the selection process, they tend to favor breakthrough ideas, with scant attention to the design of resource bundles explicitly targeting replication efforts. As a result, social entrepreneurs are daunted by the challenge to combine pressures to grow with closeness to core processes and programs and constant adjustments to local needs and resources (Bradach 2010). Related largely to the paucity of benchmarks in the field and large scale investigations on the benefits of scaling (Bloom and Smith 2010), the reasons underlying the controversial nature of scaling can be ascribed to a still widespread view of scalability as a yes-no proposition, rather than a complex process varying consistently with changes in internal and contextual contingencies. In fact, though successfully identifying drivers of scalability, current research tends to overemphasize conditions leading to the decision of whether or not to scale to the detriment of the search for the most appropriate scaling strategies given available resources and local needs (Smith and Stevens 2010). At the same time, studies proposing taxonomies of scaling options still tend to present scaling strategies as orthogonal or incompatible, thus excluding the possibility for organizations to bundle them in order to match internal and external conditions (Edwards and Hulme 1992; Tracey and Jarvis 2007; VanSandt et al. 2009). With the aim to advance our current understanding of scalability in social entrepreneurship, we propose an embedded view of scaling social impact where decisions about how to scale depend on the extent to which a social entreprise is both context and resource embedded. Building on and extending the current literature on scaling social innovation, defined as new products, services, organizational forms and business models, which address more efficiently and effectively social or environmental problems (Ramus et al. 2018), we first dig deeper into the ethical nature of scalability in social entrepreneurship. We show that scalability-related risks such as, for example, loss of control over the social mission, loss of authenticity in pursuing social change objectives, or scaling failures, can be ascribed to combinations of both misfits between scaling strategies and the institutional dynamics prevailing in a given context for scalability, as well as excessive reliance on locally-bounded resources. In fact, while institutional embeddedness is of crucial importance in determining which strategy is chosen, resource characteristics are of crucial importance in providing the organization greater discretion to experiment and approach growth opportunities. We then conclude by discussing how to reconcile scaling dilemmas by combining the purpose, level, and execution of a scaling strategy with the level of institutional embeddedness and the stickiness of the resources a social enterprise relies upon.

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The Ethical Nature of Scaling in Social Entrepreneurship Scaling Defined: Purpose, Level and Execution Since its inception, social entrepreneurship has evolved around the concept of social value maximization, that is, the ability of a social-purpose organization to produce tangible, durable social change as a result of exploiting a solution that targets a social problem related to poverty, women empowerment, social inclusion, and so on. In this context, scalability, or the spreading of solutions beyond their original intent, with the aim of maximizing social impact and the overall sustainability of the project, is one of the most attractive topics for scholarly research and managerial practice (Chell et al. 2016; Pless 2012). Existing research tends to emphasize a notion of scalability as a moral imperative and key dependent variable to assess effectiveness in social entrepreneurship (Bacq et al. 2016; Walske and Tyson 2015). Though the entrepreneurial process naturally starts from locally-bounded opportunities in a well-defined geographic context, the success of social enterprises in mitigating social burdens due to market and/or government failures is equated to their ability to scale the level of social impact (Bloom and Smith 2010; Christensen et al. 2006). Indeed, superior performance in a social enterprise is expected to be measured in terms of potential for social impact scalability. Moving beyond the normative, scalability is instrumental to sustainability. Signals from financial resource providers reveal that they tend to select their investments and compose their portfolio based on scalability of potential investees (Höchstädter and Scheck 2015; Perrini and Vurro 2011). In light of dealing with limited resources, recent research suggests that those enterprises who remain stuck in the zone of narrow risk tend to be left behind by those who grow and garner visibility. Similarly, as social ventures grow and scale, they force themselves to become more efficient, thus releasing resources to be reinvested in strengthening their reach in a virtuous cycle (Bradach and Grindle 2014; Weber et al. 2012). The widespread recognition of scaling as a key distinguishing trait of social entrepreneurship has prompted the search for approaches to categorize the vast array of experiences to grow beyond the original intent and bring about impact through scale. While investigating how to nurture growth in social entrepreneurship, Murray et al. (2010) propose a spiral model on what they consider are the six stages of a social innovation. The process starts with the identification of a problem in society that moves into the proposal of an innovative idea, its implementation and refinement, testing through prototyping till it becomes self-sustaining. It is at this stage that scaling enters with the aim of spreading the impact beyond the local context. The process ends with the search for systemic change, which involves institutional change or the creation of new institutions, as well as the creation and diffusions of new norms, systems of meaning and practices. It is thereby evident that scaling in social entrepreneurship means more than simply organizational growth (Davies and Simon 2013).

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Despite differences in labels and taxonomies, existing studies tend to converge on two seemingly opposite approaches to impact maximization. On the one hand, scholars underline the importance of scaling out, that is the quantitative growth of impact in terms, for example, of geographical expansion and increase in the number of people and organizations deriving positive outcomes from the solution (Kickul and Gundry 2015; Seelos and Mair 2017). Scaling out means impacting greater numbers, that is, enlarging the number of beneficiaries served or communities impacted, mostly through replication of the organization or its programs in different contexts or dissemination of principles or values. In contrast, impact maximization is not only related to serving more constituencies but also to improving the extent to which current targets are served. Cases abound of social-purpose organizations growing within their chosen beneficiaries, namely scaling deep (Bloom and Chatterji 2009; Riddell and Moore 2015). Scaling deep refers to the qualitative improvement of impact, such as the development of an appropriate scope of products, relationships and services that better meet the needs of the target community. In other words, scaling deep is intended to change the cultural arrangements behind a social problem while promoting changes in habits and values through deeper interventions in the contexts they already serve. It is growth that occurs via consolidation of an existing solution without moving beyond the original boundaries. Westley and Antadze (2013, 4) also refer to scaling up as an alternative scaling strategy that rests on “identifying opportunities and barriers at broad institutional scales, with the goal of changing the system that created the social problem in the first place”. Occurring as a consequence of scaling out, when the proposed solution achieves enough visibility, scaling up is aimed at countering the same institutional obstacles behind the problems they want to tackle and at moving the innovation to a higher scale where its systemic impact can be profound and durable. Regardless of whether its focus is on depth or breadth of the social impact, scalability is intrinsically multi-level (Dees et al. 2004), such that the decisions about which level to scale and how to combine levels have to be taken. Accordingly, scalability could take place at the organizational model level – an overarching structure for mobilizing people and resources to serve a common purpose, at the program level – an integrated set of actions that serve a specific purpose, or at the principle level – the general guidelines and values about how to serve a given purpose. Accordingly, scaling can occur at more than one level, as for example, an organizational model could incorporate a program to obtain the results it expects, or an organization-focus scalability strategy could be guided by the principles inherent in its implementation. Yet, research on bundles of levels is scant, with scaling mostly considered as occurring one level at a time. The acknowledgement of multiple levels of a scaling strategy and the intent behind the decision to bring social enterprises to scale are expected to be matched with an appropriate mechanism to diffuse the impact. Dees et al. (2004) were amongst the first to have mapped three options for scaling out, that is, dissemination, affiliation and branching. Dissemination is the simplest and the least demanding of resources given its focus on sharing information and knowledge without expanding the organization. Dissemination offers the opportunity to develop a loose learning

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network that offers flexibility of association between programs that do similar things, and that could adopt common principles with others (Bradach 2003). Ventures in social entrepreneurship might rather opt for affiliation, viewed as “a formal relationship defined by an ongoing agreement between two or more parties to be part of an identifiable network”. While this strategy allows the option of creating different organizational structures (Smith and Stevens 2010), there is more control when compared to the dissemination strategy. However, this control can be loose or tight. While a loose agreement is more related to organizations that pursue the same goals, a tighter one is similar to the characteristics that business franchising has. The success of affiliation is determined by the standardization of the core elements of the social-purpose organization, in order to ensure the transferability of routines and procedures across contexts, as well as the obtainment of similar impacts. The strongest strategic alternative is branching. This option implies organizational expansion by creating new sites in multiple geographical locations. This idea can be better understood when compared to what traditional enterprises do to expand their business activities. It implies a high degree of central coordination and requires the greatest amount of resources to be carried out (Dees et al. 2004). This option allows the creation of additional arms from an organizational structure already set with legal ownership, to reach new markets and thus cover more beneficiaries (Smith and Stevens 2010).

The Drivers of Scaling In an attempt to explain variety in the propensity to scale in social entrepreneurship, existing research has mostly focused on taxonomies of organizational competences to be developed by social entrepreneurial ventures interested in expanding their reach. For example, some scholars have stressed the importance of creating internal organizational conditions to favor growth and expansion (Bloom and Chatterji 2009; Bradach 2003). In this regard, attention has been addressed towards how to recruit and train volunteers or salaried workers to specialize them in scaling-up the organization. Similarly, Weber et al. (2012) also identify staffing as an important driver of social venture growth, through the build-up of individual commitment and internal resources to grow organically. Investing in training and individual skills is especially important when the execution of the social mission has a strong human component and qualifies as labor-intensive, as in those interventions where potential beneficiaries are served with personal assistance or dedicated support. To be effective in supporting growth, skills and individual motivation has to be matched with appropriate communication plans. This has to do with the power of persuasion of the social entrepreneurial venture when effectively and clearly communicating the message they want to convey and their effectiveness in achieving intended outcomes. Through communication, it is possible to further motivate or attract employees and volunteers and donors, as well as increase the level of awareness

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among potential beneficiaries (Crutchfield and Grant 2008). Yet, both staffing and appropriate communication strictly depends on the ability of social-purpose organizations to clearly understand the critical determinants behind their results (Perrini et al. 2010). Formalization of the key ingredients behind the social mission is what allows social entrepreneurial ventures to make their model less dependent on the charisma of their leader or founding teams and be transferable across contexts. Dees et al. (2004) refer to this competence as readiness, that is, the extent to which the social entrepreneur or the social enterprise is clear about the elements behind its original success. Any social entrepreneurial venture has core elements that make it what it is. The better they are at defining them, the more evident the signal that the initiative can be spread up beyond its original boundaries. Finally, scalability is strictly related to the ability to mobilize needed resources (Bloom and Smith 2010), as well as to forecast potential risks or potential downside for the whole organization and for society in general. Organizational competences have to be complemented with the development of an external orientation, that is, the ability of a social venture to analyze the environment and leverage its context to plan and execute a given scalability strategy. In fact, the execution of a social entrepreneurial opportunity presupposes the desire of a social entrepreneur to incorporate disruptive elements in the society and promote changes that are durable and sustainable. In order to create, promote and consolidate these changes, it is necessary to know the ecosystem in which the opportunity has been executed as well as the ecosystem in which the scalability of that opportunity is going to take place. In this regard, Bloom and Dees (2008) classify external dimensions according to actors and conditions. Actors refer to all those players in an ecosystem who could have positive or negative impacts on the development of a social entrepreneurial venture. They include resource providers, which are those actors who provide not only capital, but also skills, knowledge and/or technology; competitors, such as other organizations that compete to obtain the same resources or that are targeting the same beneficiaries; complementary organizations and allies, refers to the people, organizations or networks that could offer help to collaborate in the change that is being promoted; beneficiaries and customers, are the ones that receive the benefit produced by the implementation of the social innovation. Actors also include opponents and problem makers, it is very important to map these actors since they are those who might be contributing to the problem that wants to be addressed, or might directly oppose or indirectly block the spread of the social innovation, be it for personal, group or political interests. According to Björk et al. (2014) all these actors can also be divided between those who drive the supply of social innovation, those who affect the demand, and the intermediaries who act as brokers between the supply and demand of social innovations. Scalability also requires an analysis of the environmental conditions of the ecosystem to acknowledge the barriers that one might encounter at the different levels (Westley and Antadze 2013). Based on this assumption, it becomes necessary to analyze the political and administrative structures, the role of the economy and market, geography and infrastructure, as well as social and cultural factors (Bloom and Dees 2008).

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In sum, to be able to effectively execute a scalability strategy it is necessary to develop relational competences, such as, for example, alliance building, that is, the ability to create alliances, partnerships, coalitions, to exploit complementarities or strengthen bargaining power (Bloom and Chatterji 2009), or stimulating market forces, that is, generating enough awareness about the social needs to drive the demand for potential solutions and create the conditions for scalability.

The Ethical Challenges of Scaling Since social entrepreneurial potential is evaluated in terms of expected social value, scalability is the criterion to keep in mind in the process of diffusing a solution to a social problem as deeply and widely as possible to maximize social change and eradicate the root causes behind social disequilibria. Yet, scaling is not an easy decision as it often demands substantial changes to the original structure of the organization and its processes. Social entrepreneurs often insist that small is beautiful because they fear expansion (Ramani et al. 2017). The burdens of scaling can be mostly related to the following grey areas. First of all, scalability can threaten or squeeze some of the entity’s life-giving essence and closeness to the social mission. Growth-oriented social entrepreneurial ventures are likely to share a stronger commitment to the market, which may or may not overlap with the needs of its proposed beneficiaries (Costanzo et al. 2014; Ebrahim et al. 2014). The expansion of an organization always leads to a rationalization and standardization of procedures, with the related risk of understating the caring goal to favor of bureaucracy and procedures. Additionally, different from conventional scalability where marginal costs decrease with each unit sale, social entrepreneurship is meant to generate real impact on complex, entrenched societal issues. These problems cannot be simply solved with standardized products or services that can be sold in ever-increasing quantities. Scalability in social entrepreneurship requires continuous experimentation, adaptation and multi-faceted approaches with substantial human intervention (Dudnik 2010). Indeed, replication can require as much time and energy as those invested in understanding the first target of beneficiaries. As a consequence, scalability is a costly exercise, such that the tension between mission and financial urgency can become severe. Moreover, social entrepreneurship is meant to produce tangible, durable changes while improving the conditions of the target beneficiaries. The tension towards scalability could require the freeing up of resources to move the interventions to another location. In turn, this could reduce the durability of social benefits especially in those situations where contingent interventions are needed and maintained to ensure that efforts have lasting impact. The complexity of combining scalability with the creation of the conditions for the intervention to remain beneficial, can lead social entrepreneurs to be more inclined to respond to the most solvable social problems, rather than the most entrenched ones (André and Pache 2016).

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Finally, scalability is worth pursuing in the social entrepreneurship arena when it improves social impact. Indeed, impact evaluation becomes important in order for social entrepreneurs to justify their choices and remain attractive for resource providers. Existing literature tends to consider impact evaluation as a prerequisite for scale, as well as an important tool to evaluate the effectiveness of any scalability effort (Bradach 2003). Yet, impact evaluation is extremely demanding for organizations as well as subjective when it comes to social benefits (Miller et al. 2012). In turn, it brings with it the risk of diverting social entrepreneurs’ attention more towards measurable outcomes than qualitative relationships. In sum, despite promise, theory and practice still share ambiguous conclusions on the benefits of scaling leaving room for further theorization on the multifaceted nature of scalability, as well as on the conditions affecting how scalability should unfold. The reasons behind are twofold. First, though existing research acknowledges the importance of context in driving the success of scalability, the latter is still mostly analyzed as occurring in a vacuum rather than in relation to the context. In fact, it might be that despite the most expert staff, a scaling-up strategy turns into a failure if variation across contexts is not taken into due account. Second, existing research converges on recognizing scaling as a resource-intensive activity for social entrepreneurial ventures. Yet, resources are not equally transferable across contexts, such as scalability could be prevented when success in achieving a given social target is linked to resources that are developed as a result of path-dependent or context-dependent actions. By bridging both context and resource dependencies, it would be possible to explain failure despite valuable competences, as well as suggest how to approach scaling in a way that match both external and internal conditions.

The Role of Contexts in Enabling or Inhibiting Scale In an attempt to enrich theoretical and empirical explanations of variation in entrepreneurial behavior, process and outcomes research is increasingly recognizing the need for interpreting entrepreneurship in the context in which it occurs (Shane 2003; Webb et al. 2009). Spanning from formal rules and regulation (North 1990) to social norms and taken-for-granted assumptions (Meyer and Rowan 1977), institutional forces are generally expected to both enable and constrain entrepreneurial action in that they motivate economic actors to operate within institutionally prescribed boundaries, norms and arrangements (Dacin 1997; DiMaggio and Powell 1983; Scott 1995). Most of the debate on the importance of examining entrepreneurial efforts in context has explored how institutions provide a backdrop of resources and practices affecting the dynamics of opportunity identification and exploitation (Bruton and Ahlstrom 2003; Gnyawali and Fogel 1994), as well as the growth of newly founded entrepreneurial entity (Aldrich and Fiol 1994; Zimmerman and Zeitz 2002). In fact, the extent to which formal rules (laws and regulation) and informal constraints (customs, norms and cultures) are supportive of entrepreneurship by removing

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conditions that create entry barriers, market imperfections, complex access to the necessary resources exerts a powerful influence on entry rates (Bruton et al. 2008) and resulting trajectories of entrepreneurial initiatives (Farjoun 2002). In this regard, despite being related to the ease of launching a new venture, institutional embeddedness confers the right to exist to an individual organization and its activities (Suchman 1995), thus affecting entrepreneurial resilience and growth opportunities (Peng and Health 1996; Starr and MacMillan 1990). Accordingly, new ventures that adapt to institutional pressures and expectations are more likely to obtain access to scarce resources and have higher survival chances than those that do not (Khaire 2010; Meyer and Rowan 1977; Singh et al. 1986). Similarly, the prominence and impact of social entrepreneurship become more or less feasible and effective depending on the institutional embeddedness in a given context, such that economies characterized by huge resource constraints and institutional voids represent the primary source of social entrepreneurial opportunity identification (Mair and Martì 2009; Perrini et al. 2010). It is by disembedding from the local context that social innovations emerge, though being anchored to the local context has been proved to drive later enactment of that opportunity for change (Jack and Anderson 2002). Despite emphasizing either institutional embeddedness as an antecedent of entrepreneurial action or institutional change, innovation and resilience as the outcome of entrepreneurial agency, the embedded agency perspective on social entrepreneurship tends to converge on a conception of institutions as both remarkably stable and malleable, such that the dynamics of institutionalization become of critical importance to paint a complete picture of the entrepreneurial phenomena. Yet, attention has been disproportionately addressed toward the interaction between institutional contexts and social entrepreneurship in the early stage of the entrepreneurial life cycle, leaving issues of scaling and growth aside. On the contrary, the extent to which social entrepreneurial ventures are more or less embedded into contexts heavily affects the feasibility and appropriateness of their scaling attempts (Peng 2003; Purdy and Gray 2009; Vurro et al. 2010). First, existing laws and rules in a field greatly affect the repertoire of acceptable scaling strategies promoting certain type of behavior while restricting others (Scott 1995). When scaling occurs across national and regional environments, variation in the extent to which the legal frameworks, property rights, information systems or regulatory regimes are developed establish not only the permissible range of scaling choices but also their effectiveness. Studies on microfranchising in base-of-thepyramid markets show how inefficient legal systems, lack of information technology infrastructure, and high unemployment result in significant challenges to franchising’s traditional performance drivers, forcing organizations to incur significant expenses in dispute resolution (Deelder and Miller 2009; Kistruck et al. 2011). Other examples might be related to the existence and content of tax laws regarding the deductibility of philanthropic contributions, restrictions to access to certain forms of capital (e.g., with respect of equity ownership), or the development of a labor market for voluntary work (Gardberg and Fombrun 2006). These examples suggest

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that the regulatory component of the local institutional environment sets a context for the potential replicability of key success factors behind the original intent. Second, widely shared cognitive categories about what constitutes appropriate, credible, or legitimate organizational practices create local expectations about the role of the entrepreneur in that context. In fact, the cognitive component of a certain institutional field refers to socially constructed role models to which actors decide to adapt for patterning their actions in a way that they are not sanctioned by the community (Scott 2007). With regards to entrepreneurship, cognitive institutional forces shape how societies accept entrepreneurs, inculcate values, and even create a cultural milieu whereby entrepreneurship is accepted and encouraged (Bruton et al. 2010). Moreover, the bases for acceptability change as the level embeddedness ranges in a field between low and high consensus about cognitive boundaries for organizational conformity to expectations (Marquis et al. 2007). Accordingly, in term of scaling, countries lacking an established infrastructure and facing high levels of unemployment, low levels of education, and low income per capita (contexts typically targeted by social entrepreneurs operating in developing countries) might push towards catalytic scalability that fosters local development, by involving local communities rather than importing an entrepreneurial model by itself. On the contrary, with high levels of institutionalization characterized by greater uniformity of cultural understandings and greater resistance to change (Zucker 1991), organizations, in their quest for legitimacy, will generally align their scaling practices with those sanctioned by the community, searching for adherence to dominant logics in a given field (Vurro et al. 2010). Finally, the social and normative systems that develop in certain contexts set standards for and enforce conformity to accepted entrepreneurial behavior through a variety of knowledge transmission carriers (March and Olsen 1989). While the cognitive component of the institutional environment shapes the perceptions regarding which role is considered appropriate in a given context, the normative forces specify how that role has to be performed in order to be considered acceptable. Instead of giving a frame of reference, the normative component deals with evaluations regarding the level of appropriateness of practices in a field (Galaskiewicz and Burt 1991). As a consequence, the higher the level of embeddedness in a field the stronger the general coherence expected, thus creating proclivity to maintaining controls over the principles, programs and organizations throughout the replication process (Rein and Stott 2009). When coherence is high, institutions acting on a field point in the same direction resulting in a situation in which stability prevails. At the opposite extreme, at low levels of coherence, fragmentation prevails with no logic having the degree of consensus necessary to guide behavior to conformity. When this is the case, contradictions in the field open the way to change agents, so that actors possessing certain characteristics can take advantage of the situation, setting the rules of the game. Additionally, norms in a field provide information about business partners and their likely behavior, which reduces information asymmetries. Emerging economies, for example, are typically characterized by more obscure evaluative criteria, thus having higher partner-related risks and higher costs related

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to information search for entrepreneurs deciding to start their business (Peng 2003; Peng and Health 1996). In sum, the arguments above point to an embedded view of scaling, such that the level of institutional embeddedness sets the context and shapes the boundaries and approaches for pursuing the objectives of scaling.

Scaling as Driven by the Fungibility of Resources Building on the seminal contribution by Penrose (1959), research on the resourcebased view of the firm (Barney 1991; Peteraf 1993) has progressively agreed on acknowledging the role and relevance of a firm’s unique resource endowment for the execution and success of growth strategies (Mahoney and Pandian 1992; Sirmon et al. 2007), such as market entry in new competitive domains following diversification decisions (Rumelt 1982; Teece 1982; Wang and Barney 2006), geographical expansion via internationalization (Hitt et al. 1997; Peng 2001), or corporate entrepreneurship dynamics (Barringer and Bluedorn 1999; Covin 1991; Zahra 1991). In the search for the right fit of resources to continuously stimulate attentiveness to growth opportunities, early reflections on the competitive gains associated with the development of an entrepreneurial orientation by large firms (Lumpkin and Dess 1996) have boosted scholarly research towards a deeper look into the specificities of newly funded ventures in their use of resource bundles to support either the shift to maturity (Gilbert et al. 2006) or the entrance in new markets (Sapienza et al. 2006; Westhead and Wright 2001). Unlike incumbents, new ventures tend to suffer liability of newness and smallness, such that proving the viability of their business models becomes a more stringent goal than sustaining growth (Brüderl et al. 1992; Brüderl and Schüssler 1990). Yet, in spite of both huge resource constraints and higher chances of failure compared to established firms, new ventures have been shown to be able to successfully exploit growth opportunities based on superior abilities to adjust their resource configurations to meet the demands of their environments (Sapienza et al. 2006). As a consequence, empirical evidence on entrepreneurial growth based on flexibility in the use of scarce resources (Baker and Nelson 2005; Gilbert et al. 2006; Sirmon et al. 2007), together with results supporting the potential inefficiencies related to resource abundance in established firms (Autio et al. 2000; Mishina et al. 2004; Mosakowski 2002) have fostered a shift toward a less simplistic view of the relationship between resource endowments and growth. In particular, rooted in the theories on resource slack (Bourgeois 1981; George 2005) for entrepreneurial organizations (Starr and MacMillan 1990), early emphasis on resource levels as predictors of new venture growth have been progressively complemented with a greater attention to resource characteristics and their fit with strategic intent. Accordingly, young firms’ survival and growth have been increasingly explained in terms of resource fungibility, defined as the extent to which unique resource bundles may be deployed for alternative uses (Mishina et al. 2004).

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Acknowledging that resources differ in the extent to which they can be flexibly applied to multiple ends interchangeably is critical in order to have a comprehensive understanding of the attitude of entrepreneurial organizations toward growth. In fact, having fungible resources provides organizations with greater degrees of freedom to adapt, experiment and capitalize on emergent growth opportunities (Alvarez and Busenitz 2001; Sapienza et al. 2006). The integration of fungibility as a key construct in the study of new ventures’ ability to extend the scope of their activities has made it particularly important to map resource characteristics in order to understand their potential link to growth decisions and execution strategies (Anand 2002; Anand and Delios 2002). This has been proven to be especially valuable in those contexts in which huge undercapitalization and severe resource constraints make the transferability of scarce resources the most viable option to support growth paths. As recent research shows (Dacin et al. 2011; Nicholls and Cho 2006), social entrepreneurship belongs to the context described above, such that the extent to which available resources are more or less locally-bounded rather than flexible in their use across multiple settings becomes crucial in predicting growth strategies and scaling attempts (Mair and Marti 2009; Tracey and Jarvis 2007). In fact, differing from commercial entrepreneurship in term of a stronger emphasis on social value creation over economic capital accumulation (Dacin et al. 2011; Zahra et al. 2009), social ventures are generally more limited than their commercial counterparts from tapping into the same markets for resources needed for capital-intensive replication strategies (Austin et al. 2006). For example, markets for financial capital explicitly targeting social purpose organizations are much more fragmented than traditional ones, both in term of heterogeneity of the actors involved and accessibility of the sources (Perrini and Vurro 2011). Similarly, social ventures often suffer from difficulties in attracting and retaining the best talents, especially due to the specificities and newness of the pursued social mission for which structured markets for required competencies are still emerging (Bloom and Chatterji 2009; Tracey and Jarvis 2007). In an attempt to overcome barriers to resource acquisition, social ventures have been shown to rely more on external resources than conventional entrepreneurship, such as, relational or cultural resources (Dacin et al. 2010). Mapped in terms of the quality and quantity of relationships in which an actor is embedded (Adler and Kwon 2002), relational resources are increasingly critical in shaping the path of social entrepreneurial discovery, exploitation and growth (Perrini et al. 2010), in that they provide opportunities to exchange information, have access to donors and financial resource providers, gain visibility in a network of peers. At the same time, being characterized by a prominent tension toward the search for innovative solutions to persistent and complex social problems, social ventures are typically embedded into communities of individuals, such that the ability to collect, understand, and leverage cultural knowledge constitutes a key resource from which social entrepreneurs can draw. As a consequence, compared to conventional entrepreneurship, social entrepreneurship relies more on typologies of resources which have a strong tacit component

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and are intrinsically embedded both in individual skills and in collaborative social arrangements, such that their transfer across contexts may be not straightforward (Mair and Marti 2009; Shaw and Carter 2007; Szulanski 1996). For this reason, understanding the extent to which resources linked to the success of a social venture are sticky rather than fungible is needed in order to be able to evaluate the feasibility and appropriateness of a certain scaling strategy. In fact, fungibility affects the tendency of social entrepreneurship to move across contexts, such that mapping resource-specificities may help predicting at which level or levels (i.e., principles, programs, organizations) scalability is likely to occur.

Bridging Context and Resources: Scalability Embedded In order to extract full potential from scaling in social entrepreneurship, the complex interplay between institutional context and resource requirements has to be taken into account. Scalability implies facing some risks, such as loss of control over the social mission, loss of authenticity in pursuing social change objectives, or failure in scalability. These risks can be attributed to both the misfit between growth strategies and the institutional dynamics prevailing in the selected context for scalability and excessive reliance on locally bounded and/or path-dependent resources. In particular, we discuss how specific combinations of institutional embeddedness and resource fungibility drive the decision on how to combine purpose, level and execution of scalability. Institutional embeddedness refers to the extent to which social entrepreneurship is anchored to the regulative, cognitive and normative expectations regarding what is deemed appropriate in a given context (Hinings et al. 2017). Institutional embeddedness is low when social entrepreneurship explicitly challenges the existing order and places itself as a change agent of a given institutional context, or when the social problem is tackled in an innovative way. If this is the case, acceptable practices and regulations have still to be formalized and translated, as well as institutional actors granting accreditation or withdrawing legitimacy to organizations must be recognized as legitimate (Greenwood et al. 2011). When embeddedness is high, entrepreneurial action is interwoven with taken-for-granted conceptions about preferred courses of action and organizational responses (Maguire et al. 2004). The context is mostly supportive, and resources and legitimacy are granted when ventures maintain compliance and coherence with prevailing institutional dynamics (Zietsma et al. 2017). Resource fungibility refers to the extent to which resources can be transferred across organizational boundaries and redeployed throughout a scalability strategy (Anand 2002). At low levels of fungibility, resources behind social entrepreneurial success are context-specific, immobile and less conducive to scalability across the original boundaries. However, at high levels of fungibility, resources can be deployed for alternative uses, thus creating the conditions for favoring boundary-spanning scalability approaches to be pursued either through direct expansion or through tightly controlled affiliation.

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INSTITUTIONAL EMBEDDEDNESS Low

OUTREACH Scaling deep on programs Scaling out via program branching CONSOLIDATION Scaling deep on capacity building Scaling out via principles dissemination Low

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REPRODUCTION Scaling deep on standardization Scaling out via organizational branching TRANSFERABILITY Scaling deep on procedures Scaling out via template dissemination High

RESOURCE FUNGIBILITY

Fig. 10.1 Embeddedness, fungibility and scalability deployed

Depending on specific combinations of institutional embeddedness and fungibility of resources, social ventures can be encouraged to structure scalability in different ways. Each one of the proposed approaches is elaborated in the following sections, introduced via illustrative examples derived from the two cases below (Fig. 10.1). Illustrative Case 1: Association Dynamo Camp Launched in 2007 by Dynamo Foundation (Fondazione Dynamo) – one of the earliest Italian venture philanthropy foundations founded by Vincenzo Manes in 2003 – Dynamo Camp was a first mover into the offering of holiday camps in Italy specifically designed for 7–16 year-old children suffering from life-threatening and chronic illnesses, while in remission or post-hospitalization. Inspired by the long-standing experience and unique vision of the Serious Fun Children’s Network, a U.S. non-profit umbrella organization founded in 1988 by Paul Newman and leading the largest family of holiday camps for children with serious and life-threatening medical conditions in the world, Dynamo Camp would have adapted the Network’s mission to Italy, in order to become its Italian branch. The newly founded Camp would have had the challenging task to foster suffering children’s self-confidence and independence and enhance coping and resilience. Dynamo Camp’s ultimate mission would have been to empower children to reach beyond the limits of their illness and to create lasting and positive behavioural impacts on their lives.

*** Illustrative Case 2: Serious Fun Children’s Network (SFCN) SFCN is a growing global community of independently managed and financed vacation camps and programs serving children with serious, life-threatening illnesses and their families. SFCN came out of a non-profit organization founded in 1998 by the American actor Paul Newman, with the launch of the first Camp in Connecticut – the Hole in the Wall Gang Camp – having the mission to foster “self-confidence and independence and enhance coping and resilience [. . .]. To empower children to reach beyond the limits of their illnesses and to create lasting and positive behavioral impacts on their lives”. SFCN spans the globe with a thriving community of 30 camps and programs that have served children from over 50 countries and throughout five continents. The camps feature a diverse range of adaptive programs, such as high and low ropes courses, winter sports programs and equestrian arenas, as well as the traditional

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camp activities like swimming, boating, arts and crafts and campfires. In the last years, with the Global Partnership Program, SFCN also brings camp to life in resource-limited locations around the world, including Africa, Asia, Latin America and the Caribbean. Both cases share the same scientific background behind the social mission, that is, therapeutic recreation. Physical and psychological conditions make children suffering from serious or chronic illnesses particularly vulnerable, since they feel unsure and limited in their activities. They lack the opportunity for normal holidays, also because they often cannot participate into activities with healthy children. These children are often seriously impaired in normal socialization and entertainment, turning into relational difficulties. When all these conditions hold, therapeutic recreation in a natural and protected environment has been scientifically proven to be beneficial. Therapeutic recreation presents children with constructive challenges while avoiding competition. Clear and tangible challenges like climbing a rope or less visible challenges like learning how to express one’s feelings with a song or a poem support the Campers in successfully meeting and overcoming fears and selfperception has “sick kids”. The safe environment of the camps, with their beautiful surrounding, fresh air and friends sharing and enjoying each other achievements gives to Campers tremendous healing and the development of untapped potential. The two cases have evolved over time by leveraging completely different contexts and resource endowments. Our illustrations focus on specific stages of the cases’ evolution over time, to clarify how approaches to scalability vary and need to be adapted. In particular, we focus on the early growth stage of the Dynamo Camp (illustration case 1) to discuss scalability at different levels of institutional embeddedness, when social ventures rely on a sticky bundle of resources. We refer to the SFCN case (illustrative case 2) by focusing on its international expansion, to show to adapt scalability when the adaptation of fungible resources is needed to match different degrees of institutional embeddedness. In particular, the SFCN case serves as an illustration of how high fungibility affects the scalability of highly embedded ventures. In contrast, the Dynamo Camp case shows scalability in disembedded contexts, when resources vary from low to high levels of fungibility.

Scaling Through Consolidation Illustrative Case 1: The Capacity Building Phase Having identified a right location in terms of accessibility and proximity to local hospitals in Limestre (Tuscany), construction work began in November 2005, in accordance with the requirements of the Serious Fun Children’s Network. The Limestre site was an outstanding 900 hectares farm estate located in the beautiful hills of Tuscany. It came to Dynamo out of the strict relationship between Dynamo Foundation and its corporate founder Intek S.p.A. The farm estate was an unused

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asset owned by KME, an Intek’s controlled company leader in manufacturing semifinished copper and copper alloy products. The estate had all the characteristics to be renovated as a holiday village. It included a residential villa, a farming center, several mountain farmhouses, roads in excellent conditions, hundreds of cultivated hectares of reclaimed land, large livestock resources with a variety of wild species and fish. As of 2005, KME agreed to be involved in the project as part of its corporate social responsibility strategy and gave the farm estate for rent at a below-the-market price. Biannual visits from the Network’s auditors during construction ensured that buildings were renovated to the highest standard of quality and safety. Dynamo Camp opened in July 2007 with a pilot program, offering an enriching and safe experience to 59 children aged 7–16, in two sessions, completely free of charge. It was offering the same activities as those of a traditional summer camp, such as diving, soccer and basketball, rope courses, arts and crafts, dancing and drama nights, pinewood camping or horse-baking-riding, and many other activities with children as the main protagonists to succeed in and have a lot of fun. Yet, any program was carefully structured according to the principle of therapeutic recreation with traditional activities adapted to the special medical and emotional needs of the Campers. The entire Camps’ facilities were accessible to all children and design to maximize safety. The most immediate step after the success of the pilot project was to scale deep with the aim of saturating the Camp’s facilities, in accordance with the strategic plan agreed internally, communicated externally, and approved by the Serious Fun Children’s Network. Between 2007 and 2009 the management team agreed on the target of reaching full capacity by working on: (i) enlarging the network of medical affiliations and partnerships with paediatric hospitals, medical centres, voluntary health organizations, and individual doctors to strengthen the Camp trustworthiness and recruit more children; (ii) Extending the collaboration with parent associations to improve the visibility of the Camp, as well as involve families and siblings in ad hoc family retreat programs; (iii) Improving the Camp’s facilities to welcome children with a wider range of pathologies, as well as to increase the number of sessions and turn the Camp into an annual Camp, with sessions organized all over the year; (iv) Structuring the procedures to recruit highly qualified volunteers and staff members (i.e., nurses and medical doctors, counsellors to assist children with behaviour and emotional difficulties) to ensure the highest level of care and protection to children, as well as increase the Camps’ attractiveness for families. Working on these targets was crucial to let Dynamo Camp overcome serious challenges. First of all, the Camp was the pioneer in Italy to bridge therapeutic recreation with holiday programs. With a nationalized healthcare system, responsibilities for health-related matters were often perceived as a public sector responsibility. The creation of strong links with the Italian medical community would have been the road to acceptance and visibility. Second, Italy was not a country with a strong tradition of summer camps, especially for children suffering from serious illnesses. There was a big challenge in raising awareness of the project by leveraging on the successful experiences of the

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first Campers. Finally, the impact of the Camp on parents and children needs was not immediate to be understood. Monitoring and assessment procedures had to be formalized to align expectations and perceptions. The 1000 participants target was achieved in 2010, in line with the strategic plan. Results were disclosed during the traditional open day in September with an audience of more the 4000 people and acknowledgment by the Italian President of the Republic who assigned his Patronage to Dynamo Camp. When low institutional embeddedness combines with sticky resources, an orientation towards the qualitative dimension of social impact prevails. Social ventures are more prone to scaling deep via consolidation of the existing organization while scaling out via dissemination of principles, knowledge and information. This is a forced choice when resources are highly idiosyncratic to a particular use, so that excess amounts (e.g., the extra-capacity of the Dynamo Camp) cannot be deployed to alternative use to fuel expansions. These limits are exacerbated by the lack of connection with the institutional context and limited acceptance by the institutional actors related to the unclear prescriptions regarding engagement rule and bases for appropriateness. Accordingly, social ventures that challenge common wisdom or simply depart from mainstream approaches tend to scale out via dissemination of principles and information, with the aim of accumulating linkages and strengthening visibility to gain legitimacy and support.

Scaling Through Outreach Illustrative Case 1: Spreading the Impact Outside the Camp Right after full capacity was reached at the Camp in 2010, a new project was announced. According to the children’s need assessment, there were approximately 10,000 Italian children suffering from one of the pathologies potentially treated in the Camp. The need was evident. Yet, even operating at full capacity, the Camp would have been able to host about 85 children per session with an yearly number of hosted children with pathologies around 1000. This was not enough to fully honour the Dynamo’s mission to become a change maker in the field. As a result, the Dynamo Outreach Program began, with the aim of bringing the benefits of the therapeutic recreation to hospitalized children outside the Camp. Dynamo Radio was the first project, that is, a 24/7-web radio in collaboration with Radio DeeJay – one of the most popular radios in Italy. The project was meant both to keep the Campers’ community alive all over the year and to involve more children by making broadcasts together with them while in hospitals. As a by-product, Radio Dynamo would have strengthened the Dynamo brand and its national visibility, as well as reinforced the partnerships with hospitals and related organizations. Dynamo Radio was so successful that everyone in the development team agreed to extend the outreach program to other activities. Artistic laboratories

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as the ones performed during the sessions, Dynamo Studios, and Dynamo Musical outreach programs were launched between 2010 and 2014. 2014 was a turning year for outreach program, since the project Dynamo Off Camp Tour was launched. The Dynamo Truck reached 7 Italian cities where children had the opportunity to act in a musical, to shoot a film and produce pieces of arts. Results disclosed during the eighth Open Day (September 2014) were just astonishing. 955 suffering children had participated in the Camp’s sessions. The Camp had hosted 251 siblings and 370 parents during family retreat programs and siblings sessions. The outreach program had reached 2400 hospitalized children that year, making the visibility and awareness of the Camp the highest ever. As social ventures consolidate, reach their full capacity and strengthen their links within the institutional contexts, the need for spreading their social impact beyond the original boundaries starts orienting scaling decisions. Scaling out is generally favoured by embeddedness, since the latter supports social entrepreneurs in understanding institutional rules, get access easier access to resources by gaining support from dominant coalitions. At high degrees of embeddedness, the institutional context starts sharing part of the social venture identity, understand expectations and interests (Marquis and Battilana 2009). Yet, replication of the organization across contexts is hindered by the bundle of resources behind the social venture’s efficacy in pursuing its social mission. In fact, when high embeddedness combines with sticky, non-transferable resources, social ventures can reach out additional beneficiaries by packaging programs and scaling out through program-based branches. Embeddedness allows social entrepreneurs to access resources and opportunities, so that program scalability can be pursued by maintaining tight, direct control over the execution of the scalability strategy.

Scaling Through Reproduction Illustrative Case 2: Crating the First Family of Camps for Therapeutic Recreation At Christmas in 1981, the actor Paul Newman decided to make some homemade salad dressing to give his friends as gifts for the holidays. The successful reception of the salad dressing led Newman and his friend Hotchner to commercialize it for sale. Newman’s Own Salad Dressing ltd was officially launched in 1982 and, surprisingly, became an instant success. Profits exceeded $300,000 the first year and Paul declared: “Let’s give it all away to those who need it.” During his time at Newman’s Own, Mr. Newman began receiving letters asking for help from children suffering from serious conditions. However, tax rules prohibited individual donations by the company. Right after Newman announced his plans to build The Hole in the Wall Gang Camp in 1986, and in June 1988, the first Camp opened. The Hole in the Wall Gang Camp was dedicated to providing “a different kind of healing” to seriously ill children and their families throughout the Northeast, free of charge. It started as a

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community to celebrate the fun, friendship and spirit of childhood, where every kid can “raise a little hell.” Despite addressing special need children, the first Camp was leveraging on a long-lasting tradition in US, that is, summer camps allowing children to learn new skills in safe and nurturing environments. Soon after the first Camp was opened, requests for replication started to arise from similar contexts. In 1991, entrepreneur Charley Wood purchased the 320-acre Hidden Valley Ranch property with the intention of expanding the original concept of the Hole in the Wall Gang Camp to his beloved Adirondacks. Mr. Wood, a longtime supporter of the arts and medicine, drew his inspiration from the Connecticut camp started by Mr. Newman in 1988, and enlisted Mr. Newman’s support to help create the second Camp: The Double H Ranch. Camp Boggy Creek was founded in 1996 by Paul Newman and General H. Norman Schwarzkopf, with one simple premise in mind, that every child, no matter their illness, could experience the transformational spirit and friendships that go hand in hand with camp. Similarly, the Painted Turtle Camp was co-funded by Paul Newman and Page Adler, along with a group of dedicated individuals in 1999. The Camp, located outside of Los Angeles in Lake Hughes, has served tens of thousands of children and families since opening in 2004. All the Camps in US were directly founded by Paul Newman, together with partners, while remaining tightly coupled till the creation of the formal Association “Hope in the Wall Camps” in 2000, with the aim to crystallize the Camp format and further extend its potential reach abroad, by stimulating third-party replications. Reproduction of an organization across locations is viable when resource transferability is high within an embedded context. The high degree of institutional embeddedness means that the social venture will be planning and executing scalability in an environment where their actions and outcomes are understood and rewarded if coherent with widespread expectations and institutional arrangements. Moreover, reproduction is supported when resources behind the original intent are either diffused rather than context-specific or transferable across location. In order for reproduction to be feasible organizational capacity has to be built in order to sustain the replication efforts.

Scaling Through Replicability Illustrative Case 2: Serious Fun Children’s Network for Vulnerable Populations By the time the Association of Hole in the Wall Camps was launched in 2000 till the Association changed its name in 2012 to become Serious Fun Children’s Network, there were clearly important growth opportunities across border. The Association had accumulated a remarkable experience in delivering education summer programs to special need children, developing partnerships, and helping others do the same. Moreover, the operating model behind Camps had proved successful both in US and

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across Europe, where Paul Newman and his team had always directly participated in planning and financial support. It was based on these evidences that the Association first, the Network then, decided to develop a formalized set of core procedures and requirements needed to recruit independent member Camps, while ensuring compliance. A full membership could be complete through four subsequent stages, starting with the project proposal followed by the due diligence the provisional membership and the completion of the accreditation program. Through the work on the accreditation process, SFCN soon realized that they could extend their impacts even further, by disseminating their operating models to countries where the medical and psychological needs of children where often outside of what local resources could provide for. The Global Partnership Program (GPP) started in 2008 to spread the mission and core operations behind the US Camps’ functioning in Africa, Asia and South America. The project started with three pilot camps: Camp Colours of love in Vietnam Camp Mamohatoin Morija and Camp Sanyuka in Uganda. Different from early scalability efforts, the GPP was executed together with international organizations, by providing any community with locally designed, culturally applicable programs for children empowerment. Scalability of transferable resources leaves room for reproduction. Yet, complexity arises when reproduction implies moving across contexts characterized by different levels of institutional embeddedness for the social venture attempting to grow (George et al. 2012). When the degree of embeddedness is low in spite of transferable, packaged resources, social ventures could find it risky to replicate via branching to maintain control, since the local context is still not ready to provide support or facilitate access to local sources and knowledge. When this happens, social ventures have to simultaneously invest in creating enough knowledge and formalized procedure about the core elements behind the execution of the social mission and scale out via the translation and dissemination of templates. Yet, reproduction requires working on templates or working systems of organizational routines and practices that serve as referents or guiding recipes for any organization that intends to grow by replication (Chliova and Ringov 2017; Rivera-Santos and Rufín 2010). Thus, scaling out via packaging templates and procedures to preserve consistency throughout reproduction across sites and locations has to be complemented with efforts directed towards scaling deep.

Concluding Remarks Our chapter questioned the view of scalability as simply a yes-no proposition, rather than as a complex strategy occurring at multiple levels with different objectives and trajectories. Drawing on the emerging literature on scalability as a multi-faceted construct, our chapter argues that scalability needs more than resources and competences. The degree of institutional embeddedness and the degree of discretion

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associated with respect to the relevant resources behind the execution of the social mission dictate conditions for feasibility of certain approaches to scalability, leaving the others aside. According to our preliminary investigation based on our two illustrative cases and existing literature, embeddedness is conducive to legitimacy, acceptance and easiness in gaining support and access to resources. For this reason, resource-intensive scalability approaches, such as branching, or tightly controlled affiliation are mostly feasible in those contexts where embeddedness is high. Yet, embeddedness alone could not fully explain success or failure in direct scalability. Social entrepreneurship insists on the human component and closeness to the needs of potential beneficiaries. If this is the case, resources develop idiosyncratically with processes, procedures and stakeholders, thus limiting their transferability across contexts. In particular, the content of both scaling deep and out depends on specific combination of embeddedness and fungibility of resources. When both are low, propensity towards the qualitative dimension of scaling prevails, with scaling out mainly focused on principle and knowledge to improve visibility and build legitimacy. At the opposite extreme, propensity towards the quantitative dimension of scaling takes the lead while scaling deep gets focused on the standardization of programs and procedures to guide reproduction across contexts. Intermediate situations determine either the propensity toward branching or dissemination but at the program level. When embeddedness is high and resource fungibility is low, dissemination occurs by branching at the program level. In contrast, when the social venture is new to a context, bundles of procedures are diffused via dissemination through the engagement of local partners to allow adaptation. We advance the idea that, depending on the level of embeddedness, more or less room is left to social ventures in moving towards more or less direct forms of control over the execution of the scaling strategy. Future studies could build on this argument, proposing a process-based view of the scalability process across the stages of the entrepreneurial growth lifecycle. Moreover, we focused on embeddedness as a unicum, rather than differentiating its impact according to the regulative, normative and cognitive dimension. Future studies could investigate the impact of alignment or misalignment across dimensions on both the decision to scale and the preferred scalability patterns. Finally, we focused on the contingencies driving the decision to scale in a given way. We did not elaborate about the potential negative, unintended consequences related to scaling given internal and external conditions.

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Chapter 11

Select Conclusive Thoughts and Perspectives to Guide Further Research Antonino Vaccaro and Tommaso Ramus

Abstract The different chapters of this book represent a first attempt to acknowledge how ethics influences the antecedents, outcomes, and processes associated with social innovation and social enterprises. In this concluding chapter we elaborate on each chapter’s contributions to suggest some avenues for future research in the fields of social innovation and social enterprises and to reconnect them to broader theoretical research streams. Research in (social) entrepreneurship can investigate how different ethical drivers motivate and shape socially entrepreneurial initiatives; organizational scholars should instead study how different ethical motives influence coordinating mechanisms within social enterprises and in cross-sectoral partnerships. Accounting research can investigate how to measure social impact taking into account the ethical expectations of multiple stakeholders, beneficiaries included. Strategy research can disentangle the ethical challenges and opportunities associated with different scaling strategies of social innovations and social entrepreneurial initiatives. Scholars can also adopt an organizational behavioral perspective to disentangle how ethical values and sense of purpose influence decision making processes in business initiatives aimed at addressing societal problems. While presenting these broad avenues for further research, in this concluding chapter we also suggest specific research questions inspired by the various contributions of this book. Keywords Ethical motives · Ethical tensions · Future research in social innovation · Future research in social enterprises This edited book presents 10 contributions that provide different and sometimes alternative perspectives concerning social enterprises, social innovations, and their mutual relationships. The trait d’union of the highlighted contributions is their A. Vaccaro (*) IESE Business School, Barcelona, Spain e-mail: [email protected] T. Ramus Católica Lisbon School of Business and Economics (CLSBE), Lisbon, Portugal © Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9_11

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emphasis on the central role played by ethics in motivating initiatives aimed at creating positive value for society beyond profit maximization. Since the foundational contribution of Margolis and Walsh (2003), which urged scholars to explore how organizations could combine social and commercial goals, an increasing number of scholars has adopted multiple theoretical and empirical perspectives to study social enterprises and social innovation (see, for instance, Smith et al. 2013; Vaccaro and Brusoni 2017; Battilana and Lee 2014). Extensive research in the entrepreneurship domain has emphasized the antecedents and conditions that enable individuals to launch innovative social initiatives (Miller et al. 2012; Wry and York 2017). Organizational theorists have investigated intraorganizational processes (Ramus et al. 2017), mechanisms (Smith and Besharov 2019), governance (Crucke and Knockaert 2016), and leadership styles (Besharov 2014), which favor the realignment of social and commercial goals in social enterprises and, more generally, social businesses. Innovation scholars have studied how to design innovative and financially sustainable solutions to complex social problems (George et al. 2020; Perkmann et al. 2019), and strategy scholars have investigated how organizations working in different sectors and adopting alternative business models overcome their differences to collaboratively drive positive change in society (Reinecke and Ansari 2015). Finally, accounting and finance research has investigated how to measure social impact and fund social innovations to scale their impact (Ebrahim and Rangan 2014; Ebrahim et al. 2014). In line with Margolis and Walsh (2003) and their call for research investigating antinomies that emerge between social missions and business ventures, most of the aforementioned studies have emphasized the managerial and strategic tensions created by the combination of social and commercial goals (Smith et al. 2013) and the challenges of developing innovative solutions that are both impactful and financially sustainable (Jay 2013; Battilana et al. 2015). In doing so, and despite their merits, these studies have provided only a partial portrait of the functioning of social enterprises and the processes underpinning social innovation. Indeed, to date, research has been largely silent about the role of ethics as a driving force for social enterprises and in social innovations (André and Pache 2016). Entrepreneurs’ decisions are shaped not only by demographic, cultural, cognitive, and institutional drivers (Di Vito and Bohnsack 2017; Miller et al. 2012) but also by ethical motives (Sison 2007) that inevitably influence their choices to engage in social innovation and/or social entrepreneurial initiatives as well as which kinds of societal problems to target and how to address them. Organizational mechanisms and processes to address the tensions generated by the coexistence of social and commercial goals are shaped by the ethical value system that motivates organizational members, their leaders, and external constituents, and not only by power dynamics (Battilana and Dorado 2010), negotiation mechanisms (Ramus et al. 2017), structural arrangements (Smith and Besharov 2019) or cultural and market pressures (Ramus and Vaccaro 2017). Collaborations among different organizations are not only constrained by the goals they pursue (Perkmann et al. 2019) but also—and more fundamentally—by the ideological and ethical principles underpinning these goals (Sison and

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Fontrodona 2012; Scherer and Palazzo 2007). These principles might align or misalign, notwithstanding adopted business models and the goals pursued by partner organizations (Garriga and Melé 2004), thus favoring or hindering reciprocal understanding and collaboration. Finally, how financial and accounting tools are designed and the extent to which they are used by organizations and institutions to fund social initiatives and measure their impact depend extensively on the ethical values influencing these organizations and the institutional context in which they operate (Yan et al. 2019). Starting from the acknowledgment that ethics plays a central role in explaining social innovations and social enterprises, the objective of this edited book was to disentangle how ethics influences the antecedents, outcomes, and processes associated with these phenomena. We believe that the different chapters of this book contribute significantly to advancing such an ethically grounded understanding of social enterprises and social innovations. Read together, they unveil that the nature, aims, and locus of social enterprises and social innovations are shaped by and intertwined with ethical values that apply at the individual, intra-, and interorganizational levels. As suggested in the second chapter of this book by Besharov, social enterprises are not the only sources of social innovation; rather, social innovations can result from the efforts of disparate actors, such as individuals, corporations, and non-governmental organizations, and from their interplay through cross-sectoral partnerships and social extrapreneurship. This recognition opens avenues for new, compelling research at the intersection of business ethics (Smith et al. 2013), institutional theory (York et al. 2016), and social movements (Weber et al. 2009). Namely, how can ethical values influencing organizations, industries, and, more broadly, societies explain the adoption and diffusion of some social innovations but not others? How do policy makers, entrepreneurs, social movements, social enterprises, and other organizational forms use ethics and ethical values to mobilize and orchestrate innovative solutions to societal problems? Research can also investigate under which conditions different, and sometimes competitive, organizational and inter-organizational solutions to complex social problems are likely to emerge and answer questions such as: How do the multiple values motivating managers (Besharov 2014), entrepreneurs (Miller et al. 2012), organizations (Atran and Axelrod 2008), and environments (York et al. 2016) shape the emergence of innovative solutions to societal problems? When do they hinder the identification and implementation of social innovations? While triggering the aforementioned broad research questions, each chapter covers different aspects of the antecedents, processes, and outcomes associated with social enterprises and social innovations. They shed light on how leadership styles (Chaps. 5 and 6), the availability of resources (Chap. 10), managerial practices and processes (Chaps. 7 and 8), and environmental conditions (Chap. 9) shape the effectiveness of different entrepreneurial efforts and organizational forms in addressing complex societal problems in innovative ways. Future work is needed to investigate the ethical antecedents associated with these aspects. For instance, how do spirituality and, more generally, managers’ ethical values influence different leadership styles in social enterprises? How do individual and organizational values

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influence the likelihood of prioritizing either informal or formal coordination mechanisms (Ramus et al. 2017) to deal with complex social problems? How do ethical values influence the decision to either scale out or scale deep a social innovation? Focusing instead on the impact of leadership styles and managerial mechanisms on social innovations and social enterprises, the different chapters of this book open up avenues for research at the intersection of strategy, business ethics, and entrepreneurship. Along these lines, research is needed to address questions such as: What are the ethical trade-offs associated with scaling out and scaling deep? How does the adoption of different managerial practices influence how managers make sense of, frame, and address societal problems? Although we have identified some questions opened up by this book, we would like to emphasize two streams of research that we believe are particularly promising. First, as suggested by Pache and colleagues in the third chapter, cross-sectoral partnerships can offer innovative solutions to complex social problems by virtue of the resources and knowledge provided by the different actors involved (Clarke and Crane 2018; Selsky and Parker 2005; Seitanidi et al. 2010). However, these partnerships often come with challenges and tensions, which previous research has explained through institutional lenses (Gray and Purdy 2018) and as caused by divergent identities (Sharma and Bansal 2017), logics (Ashraf et al. 2017), and goals (Di Domenico et al. 2009) motivating partner organizations (Ferraro et al. 2015). However, tensions can also emerge from the different ethical values motivating partner organizations. For instance, the heterogeneity and (in)compatibility of the founding ethical values of different partners involved in collaborations might affect their capability to coordinate and cooperate and, subsequently, develop sound social innovations. Thus, further research can investigate how ethical values influence cross-sectoral partnerships while also shedding light on how ethical values interplay with more institutional elements to either favor or hinder successful collaborations to address complex social problems in innovative ways. Second, further research might explore the relevance of ethically-related variables in the analysis of scaling decisions. In the last chapter of this book Vurro and Dacin highlight how context and resource embeddedness explain whether and how social enterprises scale (out or deep) their impact. We suggest that further research complements this study by focusing explicitly on ethics as a key variable in determining social enterprises’ scaling strategies. For instance, research can investigate how ethical drivers motivating individuals and organizations influence scaling strategies; moreover, studies can shed light on whether and how alignment vs. misalignment between social entrepreneurs’ ethical values and the values influencing industry and societal contexts shape strategies to scale out and scale deep social impact. Moreover, scaling out and scaling deep decisions often present moral dilemmas that are rarely analyzed by scholars and practitioners (see, e.g., André and Pache 2016). Further research at the intersection of business ethics and social entrepreneurship is needed to address these issues. We believe that the different chapters of this book provide a fairly extensive analysis of the role of ethics in social innovations and social enterprises; however, we also acknowledge that some issues remain unaddressed. In particular, with this

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book, we have only marginally discussed the role of time (Kim et al. 2019) and stakeholder pressure (Crilly et al. 2012) in creating and sustaining social innovations and social enterprises. However, solutions to complex social problems should necessarily consider the ethical expectations and needs of a broad range of stakeholders and their evolution over time (Ramus et al. 2021). Not only are these expectations based on divergent ethical values (Freeman et al. 2020) but they are also likely to vary in terms of salience and power (Mitchell et al. 1997) due to changes at institutional (York et al. 2016) and competitive (Ramus et al. 2018) levels. Accordingly, further research might explore how entrepreneurs, social enterprises, and other organizational forms prioritize and address different societal issues over time and in relation to the evolving ethically-driven expectations of different stakeholders. For instance, how do stakeholder pressures define and shape organizational responses to societal needs and the adoption and diffusion of social innovations? How do stakeholder expectations concerning social and environmental issues change over time, and why? Also, how do such changes influence intra-and inter-organizational processes associated with social innovations? What is the role of middle management vs. top management in understanding stakeholder expectations? We believe that the contributions of this book can provide initial insights and avenues to shed light on the role of time and stakeholder pressures in the mechanisms associated with social innovations and social enterprises. In Chap. 4, Derek and Brusoni suggest that institutional and behavioral perspectives be combined to understand how managers’ and entrepreneurs’ own values and pro-social orientation influence their pro-social behaviors, explicitly suggesting that institutional pressures can only partially explain processes associated with social innovations and, more broadly, the management of social enterprises. On the one hand, future research could expand the analysis to include a focus on stakeholders’ ethical motivations as important drivers shaping both social innovations and the management of social enterprises. On the other hand, research could also investigate how individual and organizational ethical values filter stakeholder and institutional demands, thus complementing existing work on the role of imprinting (Battilana et al. 2015) and identity (Besharov 2014). Chapter 5 by Almandoz and Lee and Chap.6 by Pina e Cunha and colleagues can open up interesting avenues of investigation at the intersection of business ethics (André and Pache 2016), paradox theory (Smith and Besharov 2019), and leadership (Tian and Smith 2014), as they call for research studying the impact of spirituality and transcendent values in the identification of stakeholders’ ethical expectations and in recombining them with organizational priorities and purposes. Further research might empirically and theoretically explore how different spiritual perspectives guide leaders and entrepreneurs in such efforts and disentangle how the spiritual dimension affects managers’ and entrepreneurs’ abilities to identify changing stakeholder demands and transform them into opportunities for social innovation. To conclude, this book represents the first attempt to address comprehensively and explicitly the role of ethics in the functioning of social enterprises and in the processes underpinning social innovation. Additional theoretical and empirical

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research is needed to further develop this line of inquiry. In particular, more theoretical research is needed to (1) explain how different philosophical approaches inform how individuals, organizations, and societies understand, justify, and address societal issues and (2) how tensions between social and commercial activities can be framed and, ultimately, resolved.

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Vaccaro, A., and S. Brusoni. 2017. Ethics, technology and organizational innovation. Journal of Business Ethics 143 (2): 223–226. Weber, K., H. Rao, and L.G. Thomas. 2009. From streets to suites: How the anti-biotech movement affected German pharmaceutical firms. American Sociological Review 74 (1): 106–127. Wry, T., and J.G. York. 2017. An identity-based approach to social enterprise. Academy of Management Review 42 (3): 437–460. Yan, S., F. Ferraro, and J. Almandoz. 2019. The rise of socially responsible investment funds: The paradoxical role of the financial logic. Administrative Science Quarterly 64 (2): 466–501. York, J.G., I. O’Neil, and S.D. Sarasvathy. 2016. Exploring environmental entrepreneurship: Identity coupling, venture goals, and stakeholder incentives. Journal of Management Studies 53 (5): 695–737. York, J.G., T.J. Hargrave, and D.F. Pacheco. 2016. Converging winds: Logic hybridization in the Colorado wind energy field. Academy of Management Journal 59: 579–610. Antonino Vaccaro is a professor and the Academic Director of the Center for Business in Society at IESE Business School. He has authored over 20 papers in top journals such as the Academy of Management Journal, Journal of Management Studies, Research Policy, Journal of Business Ethics, Business Ethics Quarterly, Ethics and Information Technology, etc. He serves as section editor of the Journal of Business Ethics and organizes regularly conferences, thematic symposia, workshops on social innovation and social entrepreneurship in Europe, US, Africa and Latin America. Tommaso Ramus is an associate professor, Fundaçao Amelia de Mello Faculty Fellow in Social Innovation and the academic director of the Center for Ethics in Business and Economics at Católica Lisbon School of Business and Economics. His research focuses on hybrid organizations, social innovation and social enterprises. His publications have appeared in the Academy of Management Journal, Organization Studies, the Business Ethics Quarterly, the Journal of Business Ethics and Voluntas.

Index

C Choice, 3, 8, 64, 67–74, 76–78, 85, 90, 94, 122, 149, 152, 156, 203, 223, 224, 232, 244 Collaboration, 8, 18, 35–57, 65, 90, 101, 159, 166, 205, 231, 232, 244–246 Cooperation and coordination, 40, 49, 50, 53–56 Cross-sector collaborations, 8, 35–57

D Decision-making, 3, 8, 48, 52, 64, 69, 71, 145, 146, 149, 150, 159, 199

H Hybridity, 7, 10, 17–22, 26, 27, 48, 114, 116, 128, 208

I Innovation, 1, 5, 8, 19, 20, 25, 28, 35–57, 63–68, 71, 74, 76, 78, 90–92, 128, 158, 159, 164, 175, 176, 179, 202, 206, 209, 219, 224, 244 Integral human development, 87, 119 Inter-organizational partnerships, 40

M Managerialist practice, 174–182

O Operational sustainability, 139, 140, 143–148, 151–153, 166

P Paradoxes, 2, 73, 89, 90, 92, 100, 103, 110, 111, 113, 117–119, 121–129

R Risk management, 41

S Scalability, 10, 158, 216–219, 221–223, 225, 228–236 Social enterprise, 1–10, 15–27, 46, 83–85, 87–102, 104, 110–121, 123–129, 138–156, 159, 166, 173–175, 177–182, 188–191, 200–209, 215–219, 221, 243–247 Social impact, 9, 10, 17, 19–28, 66, 78, 84, 87, 89, 92, 94–98, 110, 114, 116, 122, 126, 138–148, 150–152, 164, 166, 175, 178, 179, 191, 192, 201, 202, 205, 207, 209, 216–219, 223, 232, 233, 244, 246 Social innovation, 1–10, 16–20, 22, 23, 25–28, 35–57, 63–65, 67–69, 71, 78, 84, 111, 217, 218, 221, 224, 243–247 Social preference, 8, 68, 70–79 Spirituality, 7, 9, 109–117, 121–124, 127–129, 245, 247

T Transcendence, 86, 110–113, 115–119, 127

© Springer Nature Switzerland AG 2022 A. Vaccaro, T. Ramus (eds.), Social Innovation and Social Enterprises, Issues in Business Ethics 62, https://doi.org/10.1007/978-3-030-96596-9

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