Abstract
Regular for-profit companies might claim social and environmental goals, beyond their primary economic objectives, but sustainability-driven for-profit hybrids explicitly design and implement their organizational activities to pursue social, environmental and economic goals equivalently, which typically generates tensions, inherent to their hybrid nature. The ability to address these tensions is key to these organizations’ success, yet the manner in which they do so remains poorly understood. In this case-based qualitative study, the authors explicate how specific individual and collective practices contribute continuously to alleviating hybridity-related tensions among for-profit hybrids and allow them to achieve success. With a micro-foundational perspective on for-profit hybrids’ dynamic capabilities, this study’s findings identify four central, dynamic capabilities of for-profit hybrids, supported by respective sets of micro-foundations. Nine of these micro-foundations contribute specifically to addressing central tensions, to different extents. This study thus highlights how for-profit hybrids embrace hybridity-related tensions to foster the creation of sustainable value.
Introduction
Literature on dynamic capabilities, or the ‘learned and stable patterns of collective activity through which [organizations] integrate, build, and reconfigure internal and external resources and routines in pursuit of improved effectiveness’ (Zollo & Winter, 2002, p. 340; see also Teece, Pisano, & Shuen, 1997), mainly focuses on capabilities that support the economic bottom line of for-profit organizations (Smith, Gonin, & Besharov, 2013; Wu, He, Duan, & O’Regan, 2012). Yet new forms of organizations also compete ‘not only on the quality of goods and services, but also on the ability to effect positive social and environmental change’ (Haigh & Hoffman, 2012, p. 126). These sustainability-driven, so-called hybrid organizations appear in increasingly varied sectors (Boyd, Henning, Reyna, Wang, & Welch, 2009; Haigh, Kennedy, & Walker, 2015a; Haigh, Walker, Bacq, & Kickul, 2015b; Pache & Santos, 2013), seeking to overcome conventional trade-offs among social, environmental and economic systems (Haigh et al., 2015b). Their ‘mixture of market- and mission-oriented practices, beliefs and rationales’ (Haigh & Hoffman, 2014, p. 224) and their aspirations to embrace tensions and balance multiple goals make these organizations truly different from traditional for-profit, non-profit and public organizations.
In particular, hybrid organizations design and implement distinct combinations of activities, and the resulting operating models, strategies and relationships must strike a delicate balance across long-term goals and potentially conflicting commercial market and sustainable development or social welfare institutional logics (Laasch, 2018; Pache & Santos, 2013). In their efforts to serve multiple masters, hybrids face multidimensional challenges and specific tensions (Smith & Besharov, 2019; Smith et al., 2013). The ability to embrace these challenges and tensions is central to hybrids’ success. However, knowledge about how hybrids do so remains limited (Haigh et al., 2015b; Smith & Besharov, 2019). To address this gap, we adopt a dynamic capabilities perspective and consider their micro-foundations (e.g. Felin, Foss, Heimeriks, & Madsen, 2012; Helfat & Peteraf, 2015; Teece, 2007) in response to calls for a unique conceptualization of dynamic capabilities in the context of the tensions that hybrids encounter, and specifically explore the individual and collective practices (Jarzabkowski, 2005) that underlie those capabilities (Battilana & Lee, 2014; Borland, Ambrosini, Lindgreen, & Vanhamme, 2016; Strauss, Lepoutre, & Wood, 2017).
For a consistent analysis, we focus on hybrids structured as for-profit organizations (cf. non-profit legal structure or mixed approach ‘that associates a for-profit with a non-profit [structure] through ownership, contracts, donations, or other means’; Haigh et al., 2015a, p. 60; see also Boyd et al., 2009). For-profit hybrids aim to provide appealing offers to the market at competitive prices and pursue profits, but they also adopt a mission-driven, explicit sustainability orientation and seek to drive industrial and societal change (Bromberger, 2011; Haigh et al., 2015b; Rawhouser, Cummings, & Crane, 2015). In terms of corporate social and environmental responsibility, they represent the ultimate transforming stage and ingrain the goal of generating positive impacts into their culture and ‘every aspect of the organization and its activities’ (Maon, Lindgreen, & Swaen, 2010, p. 31). For example, the Netherlands’ Triodos Bank targets ‘savers and investors who want to change the world for better’ and only lends money to organizations working to bring about positive change in the environment, society, or culture. Triodos also seeks solid growth and high net profits (37.5 million euros in 2017). The US carpet firm Interface wants to be environmentally restorative and achieve ‘climate takeback’ while remaining profitable and maintaining its position as the world’s largest modular carpet manufacturer.
Accordingly, our central research objective is to understand how for-profit hybrids’ dynamic capabilities and associated micro-foundations address the tensions inherent to their hybrid nature. With a qualitative, multiple-case study, complemented by data from 30 other for-profit hybrids, we delineate the nuanced nature of sensing, seizing and transforming dynamic capabilities (Teece, 2007; Teece et al., 1997); we also propose a fourth, distinctive liaising dynamic capability. Among 12 micro-foundations we identify as supporting for-profit hybrids’ dynamic capabilities, 9 contribute specifically to address the hybridity-related tensions that for-profit hybrids and their members experience. These identified dynamic capabilities and micro-foundations exhibit some similarities but also differ from those identified by prior studies of traditional for-profit organizations. With our dynamic capability perspective, we thus explicate how distinct sets of individual and collective practices contribute to dealing with hybridity-related tensions and ensuring the development and success of for-profit hybrids. We also extend extant for-profit perspectives on dynamic capabilities and their micro-foundations and substantiate the central importance of goal-related, context-specific contingencies for understanding and conceptualizing nuanced dynamic capabilities and the practices that support them.
Literature Review: Theoretical and Contextual Background
For-profit hybrids and related tensions
Three fundamental aspects differentiate for-profit hybrids from traditional for-profit organizations (Haigh & Hoffman, 2012, 2014; Haigh et al., 2015b). First, social and environmental change is a central, mission-driven organizational objective. Second, relationships with stakeholders are mutually beneficial, and for-profit hybrids link to the social and environmental systems in which they operate. Third, for-profit hybrids try to promote and diffuse acceptance of their business models throughout the institutions and markets in which they function. By endeavouring to foster change through commercial activity and transform their industrial and societal environments, they go beyond the strategic considerations that drive the social and environmental commitments of typical for-profit organizations. For-profit hybrids are at one end of the corporate sustainability proactivity continuum (Benn, Edwards, & Williams, 2014; Boyd et al., 2009; Maon et al., 2010). Their sustainability-driven orientation grants for-profit hybrids difficult-to-imitate capabilities, which serve as sources of competitive advantage (Boyd et al., 2009; Hart, 1995).
Yet pursuing social, environmental and economic outcomes also creates tensions. The ‘mission versus market’ strains include learning, belonging, organizing and performing tensions (Smith et al., 2013). Learning tensions emerge when ‘different time horizons … drive conflicting prescriptions for strategic action’ (Smith et al., 2013, p. 413), such as when growth might jeopardize the organization’s social mission (Marquis, Besharov, & Thomason, 2009) or the organization’s social mission might constrain growth. Belonging tensions relate to questions of identity – ‘who we are’ and ‘what we do’ (Battilana & Dorado, 2010) – and managing the divergent identity expectations of various stakeholders. Organizing tensions result from divergent internal dynamics (e.g. structure, processes, culture), such as strains related to integrating organizational practices associated with social versus market demands, finding ways to enact organizational arrangements, or hiring and socialization efforts (Battilana, Sengul, Pache, & Model, 2015; Bromberger, 2011; Smith et al., 2013). Finally, performing tensions emerge when organizations seek conflicting goals, such as a social mission versus profits (Battilana & Lee, 2014; Jay, 2013). These tensions can be linked to how organizations define success, which typically varies across stakeholders (Smith et al., 2013), and how the organization prioritizes social, environmental and financial metrics.
Without an ‘off-the-shelf’ solution, for-profit hybrids often struggle to manage these tensions and sustain their competitive edge. They require capacities to deal creatively and flexibly with the specific issues associated with each logic (Battilana & Dorado, 2010; Pache & Santos, 2013; Smith & Besharov, 2019; Smith et al., 2013), gain legitimacy and resources from diverse stakeholders (Haigh & Hoffman, 2012; Pache & Santos, 2013) and manage multiple identities (Moss, Short, Payne, & Lumpkin, 2011). In this sense, dynamic capabilities and their underlying micro-foundations are particularly relevant.
Dynamic capabilities
Dynamic capabilities refer to the organization’s capacity to integrate, build and transform its internal and external resources to address changing environments (Teece et al., 1997; Zollo & Winter, 2002). Teece et al. (1997) and Eisenhardt and Martin (2000) establish two prominent perspectives that have guided research on dynamic capabilities (Arndt & Pierce, 2018; Peteraf, Di Stefano, & Verona, 2013). The perspectives make different assumptions about the nature of dynamic capabilities and their boundary conditions, yet they ‘both focus on the role of organizational routines, both concern managerial as well as organizational processes, and both portray the dynamic capabilities framework as an extension of the resource-based view’ (Peteraf et al., 2013, p. 1392).
In addition, dynamic capabilities exhibit some common features across organizations but also may be idiosyncratic. They often result from experience and learning within the organization, so scholars have delved into their micro-foundations (e.g. Felin et al., 2012; Helfat & Peteraf, 2015; Rothaermel & Hess, 2007), which Teece (2007) classifies into three groups in a for-profit context: (1) sensing, (2) seizing and (3) transforming. A sensing capability is associated with discovering and shaping opportunities, and it stems from micro-foundations related to establishing strategic decision-making rules and resource allocations, mostly linked to R&D or business intelligence (adequately directing internal R&D processes, detecting new knowledge and technologies, identifying market expectations and collaborating with external partners). A seizing capability relates to mobilizing resources to capture value from identified opportunities. It reflects an ability to identify, filter and calibrate opportunities and threats, based on the structures, procedures, designs and incentives in place to identify necessary changes. It is linked to four micro-foundations: selecting business models and product architectures, establishing decision-making protocols, defining organizational boundaries, and building commitment and loyalty. A transforming capability involves the ability to combine, recombine and reconfigure assets, resources and structures to align with the strategic decisions identified by the sensing mechanisms and determined by the seizing mechanisms. Its four main micro-foundations are decentralizing structures, co-specializing to adapt structures and processes, establishing effective incentive and governance systems, and using knowledge management to guide learning. Despite some debate about the actual nature of these micro-foundations (Barney & Felin, 2013; Felin et al., 2012), scholars agree that understanding them requires consideration of both individual and collective levels of analysis (Felin et al., 2012; Rothaermel & Hess, 2007; Strauss et al., 2017).
For-profit hybrids and the micro-foundations of dynamic capabilities
Research addressing dynamic capabilities and their micro-foundations in the context of for-profit hybrids or corporate sustainability is scarce and mostly conceptual. Ramachandran (2011) proposes two dynamic capabilities: ‘sense and respond’ and ‘execution’, which partly reflect and overlap with Teece et al.’s (1997) sensing–seizing–transforming capabilities. Building more explicitly on Teece’s (2007) work, Borland et al. (2016) describe how organizations develop sustainability-driven strategies to enact a dual market-and-mission orientation. They contend that sustainability-driven organizations require additional capabilities, such as remapping (materials, products and processes as inputs and resources in a circular logic) and reaping (benefits from circular flows of materials at organizational and social levels). Strauss et al. (2017) introduce a catch-all concept, ‘sustainability dynamic capabilities’, that enables an organization engaged in proactive sustainability strategies to reconfigure its resource base to balance business with social and environmental objectives. These authors focus on employee behaviours as key micro-foundations and also cite Teece’s (2007) capabilities. Thus, the dynamic capabilities of for-profit hybrids appear strongly related to Teece’s fundamental dynamic capabilities but might include additional ones.
In this sense, despite these contributions, the ways for-profit hybrids develop and apply dynamic capabilities to address the tensions associated with their sustainability-driven orientation remain unclear. We need empirical, multilevel investigations of how different actors work at individual and collective levels to develop the necessary capabilities (Smith et al., 2013; Strauss et al., 2017). With this empirical study, we consider micro-foundations across both levels and how they relate to specific tensions experienced by for-profit hybrids. We also adopt practice-based theory (Jarzabkowski, 2005) and conceptualize micro-foundations in reference to the practices – individual and collective behaviours, activities and processes – that actors undertake to create economic, social and environmental value.
Methodology
Case selection and description
Considering the relative paucity of research related to for-profit hybrids’ dynamic capabilities and tensions, we turn to in-depth, long-term, multiple-case studies (Eisenhardt, 1989; Eisenhardt & Graebner, 2007). We selected three theoretically relevant European for-profit hybrids as information-rich cases, then complemented this information with in-depth interviews at 30 other European for-profit hybrids.
We used theoretical sampling to select the three case organizations. With the help of a specialized sustainability consulting firm, we generated a preliminary list of organizations, then conducted in-depth online searches, consulted regional newspapers, and contacted representatives of potential case organizations. The for-profit hybrids were selected according to two criteria: (1) they have developed sustainability-driven business models with strategically ingrained, mission-inspired objectives (Boyd et al., 2009; Haigh & Hoffman, 2012), demonstrating strong stakeholder engagement and delivering economic returns on top of social and environmental value; and (2) they are structured as for-profit. Of the five potential for-profit hybrids we initially approached to take part in our research, three agreed: CoopTailer, StewarTech and TransiFin (pseudonyms, to keep identities confidential). Table 1 details their key characteristics. CoopTailer is an international food retailer embracing mission-driven, value-based, sustainability-oriented goals, beyond traditional business objectives. StewarTech, active in process control software development and sensor technologies, explicitly integrates sustainability objectives at strategic and operational levels, with eco-considerations as a key R&D focus and an intrinsic commitment to product stewardship. TransiFin is a banking institution that proactively approaches social and environmental impacts, with a vision to act responsibly and holistically. In contrast with TransiFin, CoopTailer and StewarTech have had an explicit for-profit hybrid mission from the start and are sustainability pioneers; TransiFin purposefully sought to transform and integrate social, environmental and economic sustainability into its business. The transition from a traditional company to a for-profit hybrid (Haigh & Hoffman, 2012) presents TransiFin with challenges that are particularly relevant and that complement the findings from the other two case organizations. We conducted workshops, multiple in-depth interviews, diary collections and secondary data analyses with these organizations.
Case background, interviews and archival data.
We also collected supplementary insights from 30 other for-profit hybrids (Table 2) to gain additional in-depth understanding of topics that emerged from the three central cases. These 30 organizations came from the preliminary list of relevant organizations.
Organizations that served as additional interview partners.
Notes: B2C = business-to-consumer industry; B2B = business-to-business industry.
Data collection
We collected the data in three main stages (A, B, C), along with a supplementary fourth stage (D). The entire data collection process lasted 15 months. Stages A–C involved nine workshops, with three workshops conducted at each case organization at different points in time (the detailed workshop protocol is available on request). In Stage A, we sought to understand the history of the organizations, their contexts and their experiences dealing with multiple goals and logics. In stage B we asked middle managers to reflect specifically on the activities, processes and capabilities needed to develop and sustain a for-profit hybrid orientation; to discuss initiatives that their organizations could take; and to outline requirements for developing product- or service-related projects from a multiple-logic perspective. Stage C allowed participants to reflect on the challenges arising from the envisioned initiatives and projects. The nine workshops, involving 20 participants, lasted a combined 19 hours 30 minutes. After each workshop, we discussed key elements mentioned by the participants in interviews with two workshop participants. These post-workshop interviews, three per case organization, lasted a combined 6 hours 45 minutes. Together with a research assistant, the first author conducted all workshops and post-workshop interviews. The transcribed interviews were reviewed by the informants to obtain their feedback and validation.
The first author also recorded personal reflections after each workshop and post-workshop interview. The middle managers who participated in the workshops took notes in a diary in the period leading up to the second and third workshops (stages B and C), in which they documented day-to-day experiences, perceptions and reflections related to their organization. Together, the post-workshop interviews, personal reflections and diaries served as input for preparing subsequent workshops, and the workshop transcripts and interview summaries were shared with participants before the next workshop. As secondary data, we gathered media articles, industry reports, internal reports and materials published by the case organizations.
Stage D involved supplementary interviews with representatives from 30 other for-profit hybrids. These interviews took place after the first three workshops in stage A and ended after the final three workshops in stage C. Similar to stages A–C, the first author conducted these interviews to focus on the perceived challenges and opportunities associated with deploying sustainability-driven models and the capabilities needed to develop them. They complement and challenge the elements emerging from the three cases, with a particular focus on questions that needed deeper insights. Notably, we addressed emergent preliminary themes, such as values-driven business opportunities, building individual and collective resilience, addressing logics-related contradictions, and alleviating hybridity-related stresses and tensions. The semi-structured interview guide for these interviews (available on request) reflected our preliminary findings (Eisenhardt & Graebner, 2007). The interviews in stage D lasted a combined 21 hours 10 minutes. The multiple data types and sources thus provide triangulation (Yin, 2003) related to what we expected to be recurrent, complex patterns of purposeful action and social dynamics (Felin & Foss, 2005).
Data analysis
Our theory-generative approach included several main phases, during which we progressively increased the level of analytical generalization (Strauss & Corbin, 1990). First, to identify initial first-order codes, two authors independently formed unique views of the findings. We summarized these views as a coherent whole, to identify initial concepts in the raw data and categorize them according to Van Maanen’s (1979) techniques. Through open coding, all the research material was sorted into data incidents (Strauss & Corbin, 1990). To move from the mass descriptive codes to fewer, more inclusive ones, the first-order codes reflect recurring data incidents connected to pertinent logics, tensions, organizational capabilities and individual and collective practices developed by organizational actors. Using the first author’s initial coding, another author challenged the first-order coding to reach a preliminary consensus. The first author then reengaged comprehensively with the data. The ultimately identified set of 36 first-order codes resulted from several iterations, in which we questioned the actual similarity of associated data incidents and differences across groups of incidents (Jarzabkowski, 2008).
Second, to link related concepts across case organizations, we searched for links between and among the first-order codes to group them into second-order concepts. In particular, we were interested in how members of each case organization addressed its hybrid, sustainability-driven orientation and the related tensions. We focused on micro-foundations, as practices epitomizing how organizational members act and interact within and across the organization. For this analysis, we constantly moved among the data, themes and existing literature to ensure the fidelity of the emerging concepts with the data and confirm that our interpretations were trustworthy and credible (Gioia, Corley, & Hamilton, 2013).
Third, we turned to cross-case analyses to compare the insights that emerged from each phase within each case with those obtained from the other cases to identify consistent patterns and themes (Eisenhardt & Graebner, 2007; Yin, 2003). We discovered that organizational members consistently leveraged individual and collective practices to sense and seize opportunities, as well as to continuously transform and liaise with the organization (or at least parts of it). The interviews with the 30 other for-profit hybrids complemented and challenged these identified constructs and relationships (Eisenhardt, 1989; Eisenhardt & Graebner, 2007). Thus, we could develop a clearer distinction of the common patterns and identify idiosyncratic, organization-specific particularities. Figure 1 shows the data structure, including the 36 first-order codes and 12 second-order concepts (micro-foundations of dynamic capabilities), supporting four aggregate dynamic capabilities. Table 3 (see Appendix) provides illustrative quotes and examples.
Data structure (grey boxes relate to sets of practices that do not contribute to addressing hybridity-related tensions).
Fourth, to build our theoretical framework, we refocused on hybridity-related tensions (belonging, performing, organizing and learning) to determine how the identified dynamic capabilities and micro-foundations contributed to address them. Three micro-foundations (experiential/grounded scouting, attention to functional core and bending institutional norms) emerge as important to for-profit hybrids’ development and success but not for addressing hybridity-related tensions; they even could represent sources of strain for organizations. That is, practices supporting the identification of sustainability-driven opportunities and business possibilities through experiential processes (experiential/grounded scouting) or reflections on the importance of the central functionality of the products and services to be produced (attention to the functional core) typically precede and, sometimes, trigger tensions. The practices associated with bending institutional norms, associated with the need to be daring and unconventional, similarly were identified as creating tensions (as noted by a CoopTailer manager).
The nine remaining micro-foundations, and the practices they encompass, contribute to dealing with hybridity-related tensions. Five of them address one of the four main types of hybridity-related tensions explicitly (though not exclusively); we label them ‘tension-focused’ micro-foundations. The other four micro-foundations are ‘tension-spanning’ in that they include activities and processes that are more broadly instrumental for for-profit hybrids. At individual and collective levels, these micro-foundations help for-profit hybrids mitigate assorted stresses arising from divergent time horizons, internal dynamics, identity-related expectations and outcomes, but they do not connect explicitly with any one category of hybridity-related tensions.
Addressing For-Profit Hybrids’ Tensions Through Dynamic Capabilities and Micro-foundations
All nine micro-foundations contributing to addressing hybridity-related tensions operate at the collective level (sometimes in combination with the individual level). Figure 2 depicts the tension-focused and tension-spanning micro-foundations.
Addressing hybridity-related tensions through micro-foundations of dynamic capabilities.
Sensing opportunities: Creating a sense of opportunity
By sensing, managers and staff in the organization scan developments and underlying trends in the market environment, social setting and ecosystems to detect issues that the organization can leverage as business opportunities, though without a pure profit orientation. Beyond searching for and exploring business opportunities and technological innovation processes (Teece, 2007), for-profit hybrids focus on social and ecological innovations. This sensing dynamic capability therefore relates to an ability to create and convey of a sense of opportunity for designing and implementing commercial activities, underlain by a positive society-oriented finality (Boyd et al., 2009; Haigh et al., 2015b). Sensing entails cognitively grasping and framing the ways in which business and societal motives can coexist and interact (Hahn, Preuss, Pinkse, & Figge, 2014; Smith & Besharov, 2019). Three micro-foundations support sensing, and one contributes specifically to addressing hybridity-related tensions: the paradoxical framing tension-spanning micro-foundation.
Tension-spanning micro-foundation: Paradoxical framing
To shift away from profit-focused sensing efforts and include values-based processes, managers engage in paradoxical framing. They develop a ‘both/and’ cognitive approach and recognize social and business demands as interdependent and contradictory. They acknowledge the distinctiveness and opposing nature of economic and social mission goals, yet they consider these goals dependent on each other in the long run. For example, a manager at D20 explains that despite current consumer trends and lower manufacturing costs – where the organization’s economic interests lie – it ‘would never do to produce shoes that are broken after a year or so’. This orientation, the manager contends, is linked to the organization’s ‘world of values’ and brand image, and also to long-term considerations about resource availability. The presence of paradoxical cognitive frames (Hahn et al., 2014; Smith & Besharov, 2019) progressively affects the breadth and outcomes of the organization’s sensing efforts. At CoopTailer, paradoxical thinking represents ‘a main drive of our entire organization … not only to act commercially, which is important – we are of course happy to generate annual surpluses – but also to enact a social responsibility, ethical vision’. CoopTailer seeks to foster such paradoxical thinking through open space innovation conferences that encourage creative and counterintuitive ideas.
Practices associated with paradoxical framing are central for addressing tensions in general. Paradoxically minded managers and teams tend to develop higher awareness and understanding of sustainability-related tensions and conflicts (Hahn et al., 2014), which is a necessary condition for their subsequent management. Paradoxical framing abilities also help for-profit hybrids’ members build complex relationships with stakeholders, envision intertemporal challenges associated with their hybrid nature, and foster considerations of creative responses to sustainability-related issues at the organizational level (Hahn, Pinkse, Preuss, & Figge, 2015; Hahn et al., 2014; Smith & Besharov, 2019). The organization becomes better equipped to deal with hybridity-related tensions arising from different goals and temporal pressures, as well as from stakeholder conflicts around identity and values and from organizational dynamics.
Seizing opportunities: Constructing possibilities
When engaging in seizing, managers and staff grasp new sustainability-driven business opportunities and address them with new offerings. The technologies adopted and developed must contribute positively to maintaining social and environmental ecosystems, and the outcomes of the market-oriented activities must generate value for the hybrid organization and its stakeholders. For-profit hybrids thus develop novel combinations and business models and build specific competencies to enact their dual orientation. Their seizing efforts in turn focus more on creating, exchanging and distributing multidimensional, sustainable value (Boyd et al., 2009; Laasch, 2018) than on capturing economic value. Seizing is about co-constructing sustainability-driven business possibilities. Of four identified micro-foundations supporting seizing processes, two represent tension-spanning practices (systems thinking and building resilience) and one is tension-focused (integrative learning).
Tension-spanning micro-foundation: Systems thinking
Fostering systems thinking relates to individual and collective abilities to see the big picture and the resulting organizational capacity to understand and act on interconnections across economic and socio-environmental systems to fuel organizational renewal and health (Sterman, 2000). As the founder of a food producer explained (D1), ‘People, business, environment, time – it all works like a gearwheel. Also, not only the outcome is important, but also the way of getting there. If one gear moves faster, this can influence other components.’ An ‘affinity with systemic perspectives’ improves the capacity to understand problems and find solutions, explained the owner of a sportswear manufacturer (D28). Systems thinking relates to the problem-solving and reasoning managerial cognitive capabilities that Helfat and Peteraf (2015) identify as supporting the seizing dynamic capability. That is, systems thinking triggers more informed and inspired choices, driving the organization’s efficiency (O’Connor, 2008). Systems thinking also means ‘to develop something that changes existing behaviours’ (D4). Participants acknowledged the disruptive potential of a new product or service to solve social and environmental issues but also noted that a lack of systemic thinking made it difficult to turn opportunities into a viable, sustainable business: ‘Many of us are simply not used to think about, for example, the impact of our activities’ (CoopTailer representative).
A multilevel embrace of systems thinking entails the acknowledgement and comprehension of the complex implications of organizational actions for ecosystems and social actors. Connecting to all four types of hybridity-related tensions helps for-profit hybrids and their managers identify and act on sources of belonging and performing tensions, resulting from stakeholders’ value-driven expectations and the multiplicity of organizational goals. Fostering systems thinking also allows the organization to identify intra-organizational connections, relate functions, leverage diversity and create synergy (Wals & Schwarzin, 2012). It thereby connects with and supports the organizational ability to address organizing tensions. In addition, the development of ‘systems thinking implies attempts to understand the interdependence of phenomena over time’ (Bradbury, 2003, p. 176), so that the for-profit hybrids can approach the learning tensions emerging from multiple temporalities.
Tension-spanning micro-foundation: Building resilience
Developing activities that do not align with a traditional understanding of business requires determination. For-profit hybrids must build resilience, with adaptive practices to construct and strengthen individual and collective positions. Resilience relates to a blend of cognitive and behavioural properties that can be learned to some extent (Lengnick-Hall, Beck, & Lengnick-Hall, 2011). From a capability perspective, building resilience can support long-term organizational performance (Kuntz, Näswall, & Malinen, 2016). An aptitude to overcome adversity, address criticisms and rebound represents a central feature of for-profit hybrids’ development: ‘obstacles strengthen … and allow a person to [learn and] make progress’ (D4). According to a managing director (D11): ‘The idea of launching a savings association has arisen due to external pressure, as our bank has cancelled the loans and the credit line without legal justification…. There were also some conflicts between us and some public institutions.… This was the trigger point to develop and implement a new business idea.’ Persistence in fighting for an idea remains central even when hybrid business models become more established: ‘It is really about sticking with it’ (D30). Confident, positive people also further this effort, because ‘you always have existential problems, and, without a dose of optimism or confidence in what you do, you cannot survive.… You need a strong conviction and positive thinking’ (D21).
Building resilience helps the for-profit hybrid organization’s members cope, individually and collectively, with unforeseen events in their (inter)organizational life, which might induce any of the four tensions. In addition to a general ability to endure disturbances, resilient social systems build on continuous adaptation, learning and self-organization, interaction and intertemporal persistence (Ortiz-de-Mandojana & Bansal, 2016).
Tension-focused micro-foundation: Integrative learning
To seize opportunities and co-construct possibilities, for-profit hybrids need to develop an integrative learning capacity by attracting organizational members willing to learn and process new knowledge and ideas constantly. Jay (2013) similarly suggests that organizational members must find inventive routes out of tensions by drawing on different knowledge. Organizational integration (Iansiti & Clark, 1994) and learning (Zollo & Winter, 2002) are widely cited dynamic capability development mechanisms. Similar to traditional for-profit organizations, for-profit hybrids need members to develop an ability to address issues in a resourceful, collective, knowledgeable way to meet ‘the continuous need to develop something new and to learn to deal creatively with … changes and events and to seek creative solutions’ (D2). To develop sustainability-related integrative learning skills, for example, CoopTailer managers received financial support to participate in sustainability-focused MBA courses. If such capacity is missing, the inconsistencies of the organizational mission or values with actual behaviours can evoke frustration and stifle its sustainability-driven efforts. One employee with TransiFin noted that providing the right setting and support for integrative learning helps avoid cynicism and the potential drift of the organization’s mission that otherwise would create a ‘very frustrating’ setting. Information sharing, training and negotiation all support integrative learning skills, because employees get ‘on the same page’, as one interviewee mentioned. Integrative learners can capture a variety of knowledge sources and foster intra-firm knowledge networking, which are key foundations of innovative capabilities (Schneckenberg, Truong, & Mazloomi, 2015).
Individual and collective practices associated with integrative learning, as a tension-focused micro-foundation, enhance the for-profit hybrid’s ability to mitigate learning tensions, because they constructively nurture the adaptability and proactivity required to attend to both short- and long-term strategic issues (Fortis, Maon, Frooman, & Reiner, 2018). Fostering connections among concepts and experiences helps reveal the juxtaposition of multiple time horizons and the conflicting prescriptions for strategic action. Drawing on and mobilizing different kinds of knowledge leads to ‘socially innovative solutions’ (third StewarTech workshop). Integrative learning capabilities help ensure sustained growth.
Continuous transforming
According to Teece (2007, p. 1335), ‘the sustained achievement of superior profitability requires … efforts to build, maintain, and adjust the complementarity of product offerings, systems, routines, and structures’. Beyond profit-oriented objectives, transforming requires for-profit hybrids to design and (re)configure assets and structures as social and environmental factors and their associated requirements evolve. Transforming also requires the (re)design of processes that allow the organization to address emerging business threats and opportunities, evolving and divergent stakeholder expectations, and the challenges induced by the pursuit of multiple logics (Strauss et al., 2017). We find three micro-foundations supporting transforming capabilities: one tension-spanning (cross-vergence orchestration) and two tension-focused (flexible linking structures and organizational entrenchment).
Tension-spanning micro-foundation: Cross-vergence orchestration
This tension-spanning micro-foundation involves the complex managerial ability to foster synergistic interactions between socio-environmental and economic objectives. The top manager with TransiFin noted an objective ‘to take a holistic view of the business activities and shape them in a way that is economically, ecologically and socially reconcilable’. Echoing paradoxical management approaches that help ‘promote both creative expression and commercial success’ (Andriopoulos & Lewis, 2010, p. 112), our findings suggest that managers must orchestrate the daily enactment of multiple logics creatively; they must show that competing rationales are justifiable and essential to sustaining the organization, then act accordingly (Ralston, 2008). Yet managers also must be able to set clear strategic and asset-related priorities and arbitrate among opposing demands. ‘It is not our goal to please everybody,’ explained the managing director of a sustainable textile manufacturer (D11), adding ‘I believe that [acknowledging] this is a strength and not a source of vulnerability. I believe every company that is authentic … has a much larger fan base.’ Competing logics sometimes cannot be reconciled. At StewarTech, in some cases, one has to close one’s eyes to make sure you keep on doing what you do. This relates to questions like ‘where does all our raw material come from’ to innovate? It is all signed and officially approved, yet we have no absolute control to guarantee that, for example, the copper we use is not part of some war.
A CoopTailer representative also noted the need ‘to accept that there are too many interest groups involved. It is very difficult to understand this complex network in depth.’ Cross-vergence orchestration contributes to address hybridity-related tensions as for-profit hybrids continuously transform and manage imperatives ‘equally important but to some degree in conflict with one another’ (Birkinshaw, Crilly, Bouquet, & Lee, 2016, p. 51). Its different practices support the development of a unique values system and management abilities that can guide organizational policies and actions that integrate the strategic multiplicities that characterize for-profit hybrids (multiple goals, time horizons, identity orientations, organizational structures, processes).
Tension-focused micro-foundation: Flexible linking structures
To increase personnel consciousness and buy-in, while allowing for concurrent consideration and management of socio-environmental and market-related expectations, for-profit hybrids tend to enact flexible linking structures. This set of practices resonates with the decentralization and near decomposability micro-foundation identified by Teece (2007). Yet flexible linking structures specifically highlight the way for-profit hybrids experiment to increase employees’ participation, flatten hierarchies and develop flexible arrangements that link formal structures and actual organizational behaviour. In turn, organizations can connect and combine elements of different logics (Pache & Santos, 2013). Issue- or project-based workgroups in our case organizations offer temporary, parallel structures set up ‘to innovate and make change.… [so that] the organization can house activities that follow two different logics’ (Mohrman & Lawler, 1989, p. 257). These structures provide collective ownership and more appropriate considerations of diverging expectations. The CEO of StewarTech highlighted that with such mechanisms, ‘we get inspired to develop some strategies and tools … to reduce silo thinking’, so employees need appropriate abilities and mind-sets: ‘We believe that two qualities are important to each team member: complementary perspectives and abilities so that everyone can do something different best, as well as willingness to share their own ideas and perspectives,’ added a StewarTech manager. Managers of both TransiFin and CoopTailer noted that for loosely coupled work structures to succeed, employees must take responsibility for self-management, coordination and control.
Flexible linking structures help alleviate organizing tensions that emerge from divergent internal dynamics because parallel mechanisms and flexibly coupled structures allow for-profit hybrids to ensure sufficient levels of multidimensional expertise and develop the capacity to perform both commercial and sustainability-oriented operations. By defusing problems linked to the dilemma of differentiating versus integrating sustainability and commercial orientations, structural flexibility enables the hybrids to ‘walk a fine line between achieving a social mission and living up to the requirements of the market’ (Santos, Pache, & Birkholz, 2015, p. 37). A top manager with StewarTech argued that structural flexibility gets the firm ‘out of this cage of daily routinized action’ that characterizes rigid organizational hierarchies and that can impede the success of sustainability-driven organizations.
Tension-focused micro-foundation: Organizational entrenchment
To sustain continuous transformation processes, the policies, structures and processes that foster the dynamic development of the for-profit hybrid must connect to an organizational entrenchment micro-foundation. To some extent, organizational entrenchment resonates with transactive memory systems (Argote & Ren, 2012) and social cognition (Helfat & Peteraf, 2015) – two previously identified micro-foundations of dynamic capabilities. In our study, this set of practices refers to organizations’ ability to develop and sustain performance-related information flows, personnel cognizance and collective buy-in across the organization. The interviewees all considered performance monitoring key for embedding sustainability-driven thinking and activities into the organization. Both CoopTailer and StewarTech designed specific sustainability metrics and management systems, such as when ‘We invited an external consultant who specializes in developing measuring sustainability performance. In a series of workshops and in-depth process analyses, we then developed step-by-step a measurement system that includes both quantitative and qualitative indicators’ (D9). Despite general agreement about the importance of comprehensive, sustainability-oriented impact indicators, the organizations often had a hard time developing non-financial metrics. Measures of extra-financial performance and change efforts still represent ‘vital yet challenging issues for practitioners and researchers’ (Kato, Ashley, & Weaver, 2018, p. 558). The owner of a small, Austrian wood-processing firm explained, It is hard work to set up a monitoring system that identifies and prioritizes areas for improvement…. I regularly have to ‘sell’ this adequately to the people involved like accountants or controllers, who typically have been exposed to the for-profit measurement approaches…. It is not enough to tell them how good we are in terms of ‘doing good’ to society, but that what we are doing is tied to our strategy and business model and that we earn money by doing what we are doing. (D11)
Such communication efforts transform sustainability into business terms that, ideally, resonate with the organization’s mission, culture and overall strategy (Benn et al., 2014). To reach all employees, managers should engage in general, collective storytelling and avoid vague messages like ‘we are a sustainable hotel.… Instead, we use anecdotes and examples that really happened … to which our employees and also our guests can relate’ (D6).
The tension-focused organizational entrenchment micro-foundation contributes to help for-profit hybrids define and frame organizational successes relative to divergent goals when communicating with assorted stakeholders. Organizational entrenchment practices include developing dedicated metrics and management systems, performance indicators and coherent storytelling efforts. Such practices are especially pertinent for dealing with the central, performing tensions that emerge from for-profit hybrids’ divergent expectations, goals and metrics. The practices entail an explicit acknowledgement of the fundamental connections of social, environmental and economic performance, and they signal sustainability-oriented organizational efforts toward key stakeholder groups. In turn, they help for-profit hybrids attract support for their multiple goals. Such stakeholder support represents what StewarTech and CoopTailer endeavour to leverage when they establish tailored social and environmental indicators, in addition to economic ones, when designing their employee incentive schemes.
Liaising within and across organizational boundaries
Our findings suggest that for-profit hybrids also rely on a fourth set of micro-foundations, which we call liaising capabilities. These practices ensure close connections between the organization and key stakeholders, within and across organizational boundaries, and they foster understanding of stakeholders’ expectations. Whereas the three previous capabilities can be deployed successively in cycles of sensing, seizing and transforming efforts, liaising constitutes a cross-wise requirement to support, continuously and transversally, the development of the organization’s strategy and operations. Liaising encompasses two tension-focused micro-foundations, related to the ability to establish both enabling (inter)organizational spaces and stakeholder-inclusive governance processes.
Tension-focused micro-foundation: Enabling (inter)organizational spaces
The design and development of enabling spaces allow internal and external stakeholders to learn about organizational efforts or provide constructive insights for developing them further. Enabling spaces might be concrete (e.g. workshops, seminars, physical spaces for individual or group interaction) or virtual (e.g. online platforms), but ideally, they all foster emotional safety, cooperation and trust. In this view, enabling spaces relate to what Zietsma and Lawrence (2010) refer to as experimentation spaces or the relational spaces conceptualized by Kellogg (2009). Such enabling (inter)organizational spaces encourage organizational involvement and facilitate liaising – and, in turn, the sensing, seizing and transforming capabilities, because they alleviate fears of ‘making mistakes resulting in the missing will of individuals to change routines and behaviours’ (CoopTailer manager). For example, the Sharing 2020 digital platform, established by a full-line recycling service provider (D3), is accessible to internal and external stakeholders and allows for feedback loops. It stores knowledge and measurement frameworks to scale up data and information about sustainability-oriented performance. The platform is designed specifically to enable links across levels of information, publications and other records, such that it ensures comprehension and stakeholder ownership of the initiatives. However, creating enabling spaces often involves considerable efforts and costs, as the manager of a vegan condom producer (D15) explained: ‘to develop criteria for our transparent salary scheme, we searched for an ideal retreat somewhere … and needed several days and long-winded, painful discussions to find answers to questions’. Clarity about organizational practices, objectives and applications of interaction outcomes must be guaranteed, so that stakeholders will commit to the organization’s long-term development.
The construction of enabling (inter)organizational spaces supports efforts to liaise with shareholders and makes it easier to identify and handle potential belonging tensions that stakeholders might experience in interactions with for-profit hybrids. Safe spaces for expression and discussions contribute to foster social learning and managerial understanding of the surrounding network of actors (Pelling, High, Dearing, & Smith, 2008). Enabling organizational spaces also help managers recognize and deal with the divergent, identity-related expectations of organizational members. In addition, developed interaction spaces that cross organizational boundaries foster ‘engage[ment] with other stakeholders and people with different backgrounds’ (CoopTailer manager). The ability to enact such spaces supplies for-profit hybrids with ways to negotiate meanings and present their hybrid social/environmental–business identity to audiences in an open, genuine fashion. In turn, this tension-focused micro-foundation contributes to reduce ambiguity among stakeholders about what the organization and its goals mean and to limit tensions emerging from conflicts around identity and values.
Tension-focused micro-foundation: Stakeholder-inclusive governance
Inclusive governance pertains to the design of formal, structured, ongoing connections with complex stakeholder networks. Governance processes involve internal and external stakeholders in decisions, including appointing representatives from different stakeholder groups to boards or committees, as CoopTailer and several other organizations do. Many interviewees regard an inclusive, collaborative stance as necessary throughout the organization’s value chain. According to a representative from an organization that produces outdoor equipment, ‘We have to be aware of our responsibility for our products and for their entire lifecycle’ (D9). Creating distinct collaboration schemes at different levels provides the organization with knowledge and know-how (Mirvis, Herrera, Googins, & Albareda, 2016) and determines the scaling effect of hybrid activities (Ellis, 2010). The criteria for selecting partners or stakeholder representatives typically include values-based compatibility, such that partners ‘have similar attitudes as do we…, critical approach and values to improve our society’ (D15), though ‘a good partner [also] helps us be more successful and profitable’ (D10). As a micro-foundation, the practices constitutive of stakeholder-inclusive governance link to organization-centric practices related to the ‘governance’ micro-foundation emphasized by Teece (2007).
At local and regional levels, creating and strengthening formal ties with partners and key stakeholder representatives is a priority. CoopTailer and StewarTech both explicitly seek to stimulate some ‘community effect’. Strengthening ties with local and regional partners allows hybrids to create a ‘safety net’ in line with what Gehman, Treviño and Garud (2013) describe as practices built from ‘knotting together’ localized activities and stakeholders over time.
Stakeholder-inclusive governance represents another set of tension-focused collective practices that contributes to attenuate performing tensions. Formally granting dedicated influence and decision-making rights to key internal (e.g. investors, funders) and external (e.g. beneficiaries, clients, suppliers, associated service providers) stakeholders allows for-profit hybrids to acknowledge and strategically address evolving expectations in distinct economic and socio-environmental ecosystems. For-profit hybrids thereby can forestall emerging performing tensions while also dealing with existing ones. As explained by a TransiFin representative, close ‘cooperation with stakeholders and the interaction with the market [must be] the centre of attention’. This perspective is especially relevant in the hybrid realm, because the same event could be considered ‘a success in one domain and failure in the other’ (Smith et al., 2013, p. 410).
Conclusions
This study expands understanding of how for-profit hybrids can compete and persist by identifying and conceptually delineating the central role of dynamic capabilities and their micro-foundations in helping them address the hybridity-related tensions they face to achieve success. Our research contributes to extant literature in three main respects.
First, our qualitative, empirical enquiry goes beyond extant abstract reflections (Borland et al., 2016; Ramachandran, 2011; Strauss et al., 2017) to identify actual sets of practices and micro-foundations of four distinct dynamic capabilities that support the development and persistence of for-profit hybrid, sustainability-driven organizations. In particular, five of the twelve micro-foundations of dynamic capabilities we identify provide constructive means to cope specifically with key hybridity-related tensions, including learning (integrative learning), belonging (enabling [inter]organizational spaces), organizing (flexible linking structures) and performing (organizational entrenchment and stakeholder-inclusive governance) tensions. Along with these tension-focused micro-foundations, we highlight four tension-spanning micro-foundations (paradoxical framing, systems thinking, building resilience, cross-vergence orchestration) that more generally enable for-profit hybrids to navigate the contradictions and paradoxes triggered by their hybrid nature.
Second, we show that practices associated with the micro-foundations of dynamic capabilities can arise on individual or collective levels; micro-foundations located at different points on this continuum relate differentially to the development of the four dynamic capabilities. At a more individual level, micro-foundations such as experiential/grounded scouting and attention to the functional core that do not specifically address hybridity-related tensions nevertheless support the development of sensing capabilities. In addition, the micro-foundations related to organizational entrenchment, flexible linking structures, enabling (inter)organizational spaces and stakeholder-inclusive governance emerge more collectively, to support continuous transforming and liaising efforts. Those micro-foundations that emerge at both levels further relate to sensing (paradoxical framing), seizing (systems thinking, building resilience and bending institutional norms – notwithstanding that the latter induces rather than attenuates tensions) and transforming (cross-vergence orchestration) dynamic capabilities. These findings help address questions about ‘how different organizational actors work together to develop the capabilities that enable organizations to [drive] greater sustainability’ (Strauss et al., 2017, p. 1351). More work remains to be done to conceptualize these processes though.
Third, the dynamic capabilities we identify as relevant for for-profit hybrids extend Teece et al.’s (1997) sensing–seizing–transforming competitiveness framework. Specifically, we add nuance by addressing the hybridity-related features of for-profit hybrid organizations. We also propose the notion of transversal liaising capabilities that account for the central relational, cooperative capacities associated with sustainability-driven efforts. Our study thus stresses the importance of contextual relevance for understanding and conceptualizing dynamic capabilities that actually support the success of diverse forms of for-profit organizations. In addition, our study of the micro-foundations of dynamic capabilities of for-profit hybrids substantiates and supplements extant research by highlighting that the presence of adequate organizational structures and processes is not sufficient to ensure improved effectiveness and organizational success. Our findings stress the need to go beyond something possessed (i.e. independent of organizational members) when considering dynamic capabilities and micro-foundations, to address the actual ways actors’ practices in organizations, as manifest in underlying organizational capabilities, help deal with the challenging contingencies of goal-related, context-specific organizational pathways.
Overall, our orientation toward for-profit hybrids, as models of ;unorthodox business values and practices that challenge beliefs embedded in strategic management’ (Haigh & Hoffman, 2012, p. 234), highlights the need for a greater emphasis on perspectives that span broader social and environmental ecosystems, beyond a narrow business view. The micro-foundations of dynamic capabilities emerging from our findings often extend and reconsider, rather than substitute, sets of practices identified in more traditional business contexts (Felin et al., 2012; Helfat & Peteraf, 2015; Teece, 2007). Some practices we identify have already been established as relevant to successful organizations in general – though sometimes only to a certain extent and with different terminology. Such practices include embracing systems thinking (O’Connor, 2008; Sterman, 2000), building resilience (Kuntz et al., 2016; Lengnick-Hall et al., 2011), fostering integrative learning (Schneckenberg et al., 2015) and establishing enabling (inter)organizational spaces (Zietsma & Lawrence, 2010). The relative commonality of these sets of practices across organizations relates to their generic contributions to strengthening and sustaining performance in multiple contexts.
Other practices are more germane to hybrid, sustainability-driven ventures and have been cited by social enterprise, hybrid organization, or corporate sustainability researchers, though rarely with a dynamic capabilities approach. These practices include paradoxical framing (Hahn et al., 2014; Smith & Besharov, 2019), organizational entrenchment of sustainability (Benn et al., 2014), flexible linking structures (Pache & Santos, 2013; Smith & Besharov, 2019; Teece, 2007) and stakeholder-inclusive governance (Ellis, 2010; Mirvis et al., 2016). The micro-foundations are directly or indirectly connected with the challenges associated with the multiplicity of goals of for-profit hybrids and the diversity of logics and performance-related expectations they face. Despite their relative specificity, the development of such sets of sustainability-supporting practices is relevant for traditional for-profit organizations too, whose ‘executives know that how they respond to the challenge of sustainability will profoundly affect the competitiveness – and perhaps even the survival – of their organizations’ (Lubin & Esty, 2010, p. 42).
Finally, the sets of practices linked to experiential/grounded scouting, attention to the functional core, or bending institutional norms, which do not directly or indirectly address hybridity-related tensions, as well as cross-vergence orchestration, have not appeared in extant dynamic capabilities literature. They depart from the micro-foundations identified in traditional business settings, in that they relate inherently to dual social/environmental–economic outcomes. That is, they relate to the purpose and actual impact of the products offered by for-profit hybrids or their willingness to conduct business differently and reject the status quo.
Managerial implications
The dynamic capabilities and underlying micro-foundations that we identify, if well managed, potentially prompt imagination, commit personnel and energize explorations and exploitations of sustainability-driven challenges and potentialities. Managers in for-profit hybrids must understand that the individual and collective practices pertaining to these micro-foundations need to be nurtured continuously. In addition, they should realize that the positive influences of these practices on organizational success and hybridity may not be compatible with all business decisions. Some strategic choices exacerbate hybridity-related tensions and disrupt delicate balances. For example, Etsy was a privately held online marketplace for handmade goods, whose achievement ‘in generating income and part-time employment for low-income women is one of the modern economy’s phenomenal success stories’ (Kelly, Duncan, & Dubb, 2016, p. 46). It went public in 2015. Despite assertions that it would not sacrifice its principles for investors, the social mission of Etsy could not stand up to demands for continuous growth. Financing choices triggered increased hybridity-related performing, organizing, learning and identity tensions. Its lopsided focus on profitability initially sapped many employees’ enthusiasm (Gelles, 2017). In a contrasting example, Unilever’s takeover of Ben & Jerry’s allowed the ice cream company to improve its economic performance while also extending its social mission. Unilever seemingly understood that the sets of practices supporting its organizational effectiveness differed in this for-profit hybrid organizational context and needed to be preserved. For example, it established an external board charged with overseeing Ben & Jerry’s mission so that the unique culture would not be ‘contaminated’ (Gelles, 2015).
These examples suggest that the combined ability to sense business opportunities and create a sense of social and environmental opportunity is a vital capability that may quickly lose its potential if not supported by organizational members’ understanding and adherence to evolving strategic priorities (Ramus & Vaccaro, 2017). Some managers in our study noted that it could be difficult to believe in the actual pre-eminence of a social or environmental mission. In such cases (e.g. Etsy at some point), it might be hard to commit to declared multiple goals, live up to the hybrid mandate, and engage in all the necessary scouting, designing and framing practices.
Yet such organizational commitment can enhance resilience and the capacity to cope with tensions, as well as foster learning efforts to spur innovative pathways and help the organization seize opportunities and construct sustainability-oriented possibilities. Reflexivity seems key there; it can amplify cognitive distance from routine behaviour, enable and motivate members to develop new meaning and forms of acting or organizing, and perhaps even challenge the organizational or institutional status quo. Ben & Jerry’s challenged Unilever and nurtured its efforts to become a sustainability leader, for example.
The continued renewal of sustainability-driven organizations and transformation of their assets to maintain competitiveness is also fostered by entrenched adaptive practices. The outcomes of organizational activities need to be monitored. Using tailored metrics is thus central. It is important to legitimize activities and practices and to establish a solid storytelling basis for managers. Before its acquisition, Ben & Jerry’s lacked a clear performance management system. The benefits of sharing and enacting a constructive hybrid story, according to our workshop participants and interviewees, can be achieved through flexible, cross-functional structures. These elements encourage shared meaning across individuals and groups, who then can experiment with innovative ideas that might drive the deployment of the organization’s resource base.
From this perspective, we argue that for-profit hybrids must encourage interactional processes that nurture social and environmental innovations. To liaise within and across organizational boundaries, for-profit hybrids should seek to develop multi-organizational partnerships and social ties with diverse stakeholders. Ben & Jerry’s, despite its strong stakeholder orientation, lacked some liaising capabilities needed to unleash its full scaling-up potential and ensure the spread and implementation of novel ideas. Connecting Ben & Jerry’s job positions with Unilever’s global talent pool thus was instrumental in ensuring the presence of skills and practices (Caligiuri, 2012) that could support key liaising capabilities.
Overall, managers should evaluate the potential impact of any strategic decision on the practices underlying the four dynamic capabilities we identify. Our framework is a useful managerial tool in that respect. It can help for-profit hybrids make their dynamic capabilities’ micro-foundations explicit; it also should facilitate support for relevant sets of practices in the long run. In addition, organizations can mobilize our framework to improve current practices. Specifically, for-profit hybrids could leverage this framework to determine if they lack specific practices supporting sustainable value creation.
Research avenues
Some limitations of this study suggest potential avenues for research. First, considering our use of three case organizations, active in different industries, and the complementary perspectives offered by the wide range of additional organizations operating internationally, our theory generation likely achieves a reasonable level of contextual generalization (Tsang & Williams, 2012). Nevertheless, the outcomes of our study stricto sensu should be considered empirically pertinent only to certain geographical, industrial and organizational contexts. In particular, we only consider organizations operating in the European Alpine region. The findings likely are relevant to other geographical and institutional contexts, at least in Western markets characterized by similar recent emphases on sustainability-related business trends. Still, researchers could investigate other contexts to complement these insights. Despite the diversity of industrial horizons among the organizations we study, we do not distinguish levels of sustainability intensity or dynamism (Eisenhardt & Martin, 2000; Strauss et al., 2017) across industrial or market environments. Explicitly considering these factors could provide constructive theoretical refinements.
In a related issue, we focus on for-profit hybrids, just one of the three broad options for the design of hybrid ventures. Our findings likely provide insights into how non-profit and mixed-entity hybrids can flourish and sustain too. Yet the specific influence of other structural options on the development of dynamic capabilities and their supporting practices needs scholarly attention. Future studies also should acknowledge the sophistication exhibited among for-profit structural options today, such that ‘in addition to traditional for-profit registration categories (such as LLC and C-Corporation in the U.S.), in some regions hybrids may also register as one of several new for-profit categories serving enterprises with dual social-economic missions’ (Haigh et al., 2015a, p. 62). Such specific, for-profit, legal statuses encourage the development of for-profit hybrid ventures (Haigh et al., 2015a; Rawhouser et al., 2015) and can reduce experienced tensions. Systematic, empirical investigations of how they do so are missing though. Our findings about different processes, practices and micro-foundations might further inform efforts to understand the development of sustainability-related initiatives by more traditional for-profit companies. Beyond testing the validity of our framework in different contextual settings, we call on researchers to evaluate its pertinence for a wider range of organizational populations.
Second, the workshops and participation by members of the three focal case organizations was fortuitous; they enabled us to witness the evolving dynamics of for-profit hybrid projects and activities. Yet we were not present at all times, as would be necessary to gain a complete view of the unfolding social and environmental innovation, the tensions experienced by the organizations and their members, and the micro-foundations of dynamic capabilities. To refine understanding of processes and practices that manifest as micro-foundations of dynamic capabilities in for-profit hybrid contexts, we encourage more longitudinal research to track the evolution of practices. Such efforts might contribute to highlight how different micro-foundations actually support the development of dynamic capabilities. Our study highlights predominant relationships among distinct micro-foundations and dynamic capabilities, yet our analysis also indicates that some micro-foundations affect more than one category of capabilities and thus might be transversal.
Third, we describe practices at multiple levels, but our study does not fully address the possible associations of different individual and collective practices. To advance debates about whether ‘organization analysis should be fundamentally concerned with how individual level factors aggregate to the collective level’ (Barney & Felin, 2013, p. 145), researchers might investigate how individual practices contribute to the emergence of more collective practices, which in turn support the development of dynamic capabilities.
Fourth, in line with Haigh and Hoffman (2014), our study hints at the idea that for-profit hybrids and their dynamic capabilities and micro-foundations might provide sufficient cause to re-examine the notions of (sustainable) value chains (Porter, 1985), including the restriction of primary and support activities to the internal level. Departing from well-established viewpoints (Barney, 1991), our findings indicate that capabilities do not need to be fully under an organization’s control or specific to it to be prized and considered valuable. Continued research should investigate these questions in more depth to explicate how novel forms of organizing and competing ultimately contribute to challenge traditional strategic management constructs and ideas.
Footnotes
Appendix
Micro-foundations of dynamic capabilities of for-profit hybrids: Illustrative quotes and examples.
| Micro-foundations | Individual or collective | Illustrative quotes and examples |
|---|---|---|
| Sensing opportunities: Creating a sense of opportunity | ||
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Individual | Illustrative quotes: -‘My business idea actually really made me strong from the start, because I said from the beginning: Let them talk. Because if they would understand, they would have already done it themselves. They do not even understand it. And if they do not understand, well, [you should] let them talk. I don’t gain anything from trying to convert them.’ (D10) -‘I am married to a Peruvian woman. So I spent quite some time in this and other neighbouring countries where you see a lot of poverty; and this also stirs me a lot to go for this strategic move as we have now outlined.’ (CoopTailer) -‘The understanding of the problem came from experiencing it [personally] (…).The innovation process then was based on an in-depth understanding of the issues [that he] faced at that time.’ (D25) Other facts and examples: -At D1, the central idea underlying sustainable farming activity in a closed-loop model emerged when the founder visited an African country. Inspired by the idea of mushroom cultivation using organic waste, the sustainability-oriented business concept was ‘translated’ and transferred to an urban context. -The business concept at the heart of D7 emerged when one of the founders, with a long-standing goal of empowering disabled people in the community, repeatedly passed fruit trees in large public spaces while jogging. Building on a combination of local experiences, the plan to develop a simple product (juice) relying on a locally available resource (unharvested apples) to reach a basic double objective (meet growing regional demand for local products and create local jobs for disabled people) materialized progressively. |
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Individual | Illustrative quotes: -‘As discussed during the first workshop round, there are trends in food retailing like an increasing demand for organically-grown food or vegan products, or products with less sugar. It is our mission to develop our product assortment around these positive trends.’ (CoopTailer) -‘Through my education, I know about the shadow the textile industry is casting over us. (…) And with our business model, we aim to set up a signal against our throwaway society. (…) Mentors, my sewing machine and myself – that’s all that is needed.’ (D4) -‘Our customers expect stable, robust, fast products with easy integration. They want more support and closeness – and they want the production to be green (…). With this project, we try to combine capabilities that we already have with new innovative processes. We know that this is indeed something that our clients really value, I guess we not only talk to them but listen to what kinds of problems they have.’ (StewarTech) |
| Other facts and events: |
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Individual & collective | Illustrative quotes: |
| Seizing opportunities: Constructing possibilities | ||
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Individual & collective | Illustrative quotes: |
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Individual & collective | Illustrative quotes: |
| -‘You are confronted with a diversity of perspectives (…), which have to be accommodated. You have to become creative at times, and sometimes this also creates tensions.’ (CoopTailer) |
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Individual & collective | Illustrative quotes: |
| -At D25, a new product development project took 400–500 hours of discussion for each team member. To determine whether an idea is sustainably relevant and economically promising, D25 uses such long, inclusive, collective, dialogical processes to allow team members to learn about the multidimensional and unfamiliar elements attached to the project and develop their awareness and dedicated knowledge. | ||
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Individual & collective | Illustrative quotes: |
| Continuous transforming | ||
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Individual & collective | Illustrative quotes: |
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Collective | Illustrative quotes: |
| -D28 challenges employees to act and behave in line with a corporate philosophy that emphasizes ‘the importance of fairness and tolerance,’ individual empowerment, and responsibilities. Flat hierarchies and flexible structures within and across the organizational structure emerge continuously to ensure that new ideas are assessed and implemented quickly and that ‘even the most ambitious targets can be reached.’ |
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Individual & collective | Illustrative quotes: |
| -CoopTailer used the ISO 26000 Social Responsibility standard to evaluate and redeploy its activities, in collaboration with an external entity that fostered internal understanding of its current efforts and future sustainability-related initiatives. To foster the organizational entrenchment of sustainability-related thinking and orientation, employees are rewarded financially for contributing to meeting its social, environmental and economic objectives, as reflected in individual performance evaluations. | ||
| Liaising within and across organizational boundaries | ||
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Collective | Illustrative quotes: |
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Collective | Illustrative quotes: |
Notes: Grey boxes relate to practices and micro-foundations that do not contribute to addressing hybridity-related tensions.
Acknowledgements
The authors thank Guido Palazzo for comments on a previous draft. They also thank the journal’s editor Trish Reay, senior editor Marvin Washington, and three anonymous reviewers for their helpful, constructive and encouraging comments and suggestions throughout the review process.
Funding
The authors would like to thank Forschungsförderungsfonds (FFF) der Universität Liechtenstein and the Marketing Science Institute, Cambridge, Massachusetts, the U.S. for having supported this research.