Abstract
Hybrid practices combine core elements of different institutional logics. As such, they elicit contrasting responses from individuals, including ignoring, rejecting and adopting them. Yet, extant research in institutional theory does not explain how individuals come to form these responses. To address this gap, we adopt a sensemaking perspective and conduct an inductive, comparative case study of 14 wealthy individuals based on life story interviews, examining their responses to impact investing, an emergent hybrid practice combining elements of the philanthropy and finance logics. Our study uncovers key contextual mechanisms by which institutions influence how individuals respond to hybrid practices, a neglected dimension in sensemaking studies. In particular, we show how individuals’ degree of adherence to the logics involved shapes how they notice, interpret and finally respond to impact investing. Contrary to what previous research suggests, our study shows that individuals who are merely familiar with the logics at play are better positioned than both novices and individuals who identify with the logics to evaluate hybrid practices positively and adopt them.
Hybrid practices are practices that combine core elements of different institutional logics in novel ways (Yan, Almandoz, & Ferraro, 2021). ‘Nouvelle cuisine’, for example, introduces some modernity into classic French cuisine (Rao, Monin, & Durand, 2005). Hybrid practices are not all recent but are proliferating in today’s age of increasing competition between multiple and often incompatible institutional demands (Pache & Santos, 2021). Since they deviate from taken-for-granted ‘pure practices’ considered legitimate (Kim, Shin, & Jeong, 2016), hybrid practices elicit diverse responses from individuals. Some barely notice them (Jones, Maoret, Massa, & Svejenova, 2011), some strongly reject them (Gümüsay & Smets, 2020), while others fervently embrace them (Kim et al., 2016).
Research on how individuals form these responses is scattered and identifies disparate, only partially connected influences, including a capacity to reflect on personal experience (Voronov & Yorks, 2015), the interplay between cognitive representations of self and the external environment (Cholakova & Ravasi, 2019) or the alignment of logics between individuals’ role identity and personal identity (Wry & York, 2017). These factors are important, but they do not unpack the cognitive process through which individuals make sense of hybrid practices. This matters theoretically and empirically. As new hybrid practices proliferate, we need to understand ‘what goes on’ when people encounter them, to foresee how extensively they will be adopted – or not.
To do so, we adopted a qualitative, inductive approach and conducted a comparative case study of 14 high-net-worth individuals, examining their responses to impact investing, an emergent hybrid practice combining elements of the philanthropy and finance logics (Hehenberger, Mair, & Metz, 2019). Based on 54 in-depth life story interviews, we explored the mechanisms behind ignoring, rejecting or adopting impact investing. Our findings suggest that individuals engaged in two critical activities while making sense of it. When first exposed to the hybrid practice, they compared it with a ‘reference practice’ drawn from the pure practices associated with the two combined logics. They then formed a positive or negative judgement of impact investing based on their degree of adherence to the logic associated with that reference practice.
In particular, our study shows that being merely familiar (i.e. having only intermediate adherence) with the reference practice’s associated logic facilitates positive evaluation and adoption of the hybrid practice, whereas being a novice (no adherence) or identified (high adherence) with a logic may prevent individuals from, respectively, noticing the practice or approving it. Our empirical findings challenge existing theoretical models on individuals’ responses to hybridity, which propose that individuals identified with institutional logics are in a better position to see value in hybrid practices (Pache & Santos, 2013; Wry & York, 2017). In contrast, we show how identification with the logics at play generates resistance to hybrid practices, as such individuals prefer generic, nonhybrid practices that remain ideologically pure (Boone & Özcan, 2016). Our study contributes to both sensemaking and institutional theory, addressing neglected aspects and extending the dialogue between both theoretical traditions (Weber & Glynn, 2006). We also suggest practical implications for the diffusion of hybrid practices.
Hybrid Practices and Individual Responses
Organizational scholars are increasingly interested in the phenomenon of hybridity. Most studies have focused on the organizational level of analysis, exploring how hybrid organizations merge distinct identities, forms and institutional logics into unconventional combinations. Institutional logics are patterns of beliefs, practices, values, assumptions and rules that influence individual actors’ behaviour by providing them with means–ends prescriptions considered as legitimate building blocks for action (Thornton, Ocasio, & Lounsbury, 2012). Yet, the concept of hybridity ‘expands the scope of analysis beyond organizational forms’ (Battilana, Besharov, & Mitzinneck, 2017, p. 138), also encompassing practices, i.e. organized constellations of people’s activities (Schatzki, 2012), both inside and outside organizations’ boundaries (Pache & Thornton, 2020). Hybrid practices ‘essentially recombine core elements of different logics in novel ways’ (Yan et al., 2021, p. 905).
Hybrid practices usually contain core features of two or more existing ‘pure practices’, i.e. generic nonhybrid practices each associated with distinct logics (Kim et al., 2016). For example, microfinance combines the banking logic goal of generating profits through lending with the development logic goal of alleviating poverty (Battilana & Dorado, 2010). When Italian household goods manufacturer Alessi invited renowned sculptors to design its products, it developed a hybrid practice combining the art logic with the industrial logic (Dalpiaz, Rindova, & Ravasi, 2016). Hybrid practices can have positive, negative and ambivalent effects on individuals, organizations and society. For instance, home-sharing practices via online platforms such as Airbnb, which borrow from the commercial and community logics (Mair & Reischauer, 2017), have increased the supply of affordable accommodation for world travellers but have also caused displacement of local populations and social capital erosion. This paper does not assess hybrid practices’ effects, but aims to understand how individuals respond when exposed to such practices.
Hybrid practices are hard to read because they cross categorical boundaries (Rao et al., 2005) and deviate from the underlying taken-for-granted templates (Thornton et al., 2012). Individuals encountering them may have trouble understanding how their components fit together, or may find their combination inappropriate and judge them negatively (Boone & Özcan, 2016). Conversely, hybridity may be positively viewed by others who see synergy and added value in the combination (Wry, Lounsbury, & Jennings, 2014), and adopt them as desirable alternatives to more established, nonhybrid practices (Kim et al., 2016).
Understanding the formation process of individuals’ divergent interpretations and responses matters because hybrid practices have become increasingly prevalent. They existed in past centuries, but are proliferating in our era characterized by fragmenting trends such as ‘glocalization’ and ‘digitization’ (Drori, Höllerer, & Walgenbach, 2013; Pache & Santos, 2021). As multiple, uncoordinated and incompatible institutional demands become more prevalent (Greenwood, Raynard, Kodeih, Micelotta, & Lounsbury, 2011), hybrid practices emerge as a way to reconcile them, but individuals may respond differently to their novelty.
How individuals respond to hybrid practices
Research on the micro-foundations of institutions provides clues to how individual cognition shapes responses to hybrid practices (Haack, Sieweke, & Wessel, 2019). Individuals respond in different ways to similar logics in a given context (Almandoz, 2012), due to organizational and extra-organizational institutional forces influencing them (Voronov & Yorks, 2015). Current literature suggests that individuals develop commitments to institutional logics through various channels including education, work experiences, membership in organizations and groups or participation in civic life (Friedland & Alford, 1991). As people accumulate experience in multiple institutional spheres, they develop specific commitments to logics of varying strength and salience (Greenwood et al., 2011). Their unique institutional biography reflects ‘the events, relationships, and circumstances that shaped their connection to those institutions.’ (Lawrence, Suddaby, & Leca, 2011, p. 55) Actors in similar contexts but with different connections to logics may thus respond differently to the logic combination proposed in hybrid practices.
Extant models predicting individual responses to multiple institutional demands shed light on the factors driving these responses. Pache and Santos (2013) propose that individuals’ responses to multiple logics depend on their degree of adherence to each of the competing logics, i.e. whether they are novices (no adherence), familiar (intermediate adherence) or identified (high adherence) with the logic. They argue that this influences the logics’ salience for individuals, their commitment to them and their willingness to champion them. In particular, they predict that individuals identified with two logics are more likely to respond positively to their combination because they understand and appreciate both. Voronov and Yorks (2015) further argue that capacities to reflect on personal experience shape individuals’ perception of and responses to institutional contradictions. Wry and York (2017) propose that the relative salience of role identities and personal identities associated with competing logics explains how entrepreneurs balance social welfare and commercial logics in venture creation. They point to the individuals with strong role identification with both logics as best positioned to create hybrid social ventures.
These theoretical models are built around typologies of responses that vary according to specific, individual relationships to institutional logics. However, they remain silent about the process through which individuals come to form these responses. The stages that individuals go through in responding to hybrid practices, and the mechanisms at play during these stages, remain undertheorized. According to Purdy, Ansari and Gray (2019, p. 409), the institutional logics perspective often provides an ‘overly static view of meaning making’ and may be insufficient to explain how individuals subjectively and dynamically interpret multiple logics (Bévort & Suddaby, 2016). To understand ‘what goes on’ when people cognitively apprehend hybrid practices, we complement the ‘meta-theory’ of institutional logics (Pache & Thornton, 2020) with a compatible, process-oriented perspective: sensemaking.
A sensemaking perspective on individual responses
The sensemaking perspective, rooted in Weick’s (1995) early work on organizing as a process, focuses on how ‘people work to understand issues or events that are novel, ambiguous, confusing, or in some other way violate expectations’ (Maitlis & Christianson, 2014, p. 57). It thus provides a valuable lens for studying the cognitive construction of individuals’ responses to gaps, ambiguities, and contradictions associated with hybrid practices that deviate from taken-for-granted templates (Weber & Glynn, 2006).
Sensemaking is usually split into three interrelated stages. First, people notice cues from their lived experience that interrupt ongoing activities and violate expectations. Second, they create interpretations of the situation, drawing on both cognitive frameworks and discursive practices. Third, they take action to restore order or precipitate change in their environment (Weick, 1995). Taking action (e.g. ignoring, rejecting or adopting a given activity) generates further cues and individuals test their provisional understanding of the situation, prompting a new cycle of sensemaking. While sensemaking takes place in the present as an ongoing activity, creating meaning is retrospective in nature, ‘as one looks back over action that has already taken place’ (Maitlis & Christianson, 2014, p. 94).
Importantly, sensemaking is not confined to dramatic events. While most empirical studies have explored sensemaking after major jolts or organizational crises, it may happen in more mundane situations (Sandberg & Tsoukas, 2015). We argue that exposure to hybrid practices generates ambiguity and confusion that trigger sensemaking, hence the relevance of the sensemaking perspective in unpacking responses to these practices. Bridging the sensemaking and logics literatures, a few empirical studies have uncovered ‘transformative mechanisms’ whereby actors reproduce or change logics through sensemaking (Bévort & Suddaby, 2016; Jay, 2013). But how actors’ relations to logics shape their sensemaking remains understudied. We address this gap by exploring how individuals make sense of and respond to hybrid practices that combine elements of different logics.
Methods
We conducted a qualitative inductive study analysing individuals’ responses to impact investing, an emergent hybrid practice combining elements of the philanthropy and finance logics. We used an interview-based, comparative case study (Eisenhardt, 1989) contrasting the life stories (Atkinson, 1998) of 14 wealthy individuals to understand how they made sense of and responded to the practice of impact investing. The study was designed to discern how the sensemaking process was experienced by each informant, and identify common patterns inducing different possible outcomes. We followed Langley’s (2007) view that multiple case studies can be used to show ‘how similar processes occur in different contexts’ (Gehman et al., 2018, p. 295).
Empirical context
Our population consists of ‘high-net-worth individuals’ (HNWIs), a financial services industry label for individuals owning liquid assets of $1–20 million. We wanted to understand how these HNWIs responded to exposure to impact investing, defined as ‘investments made into companies, organizations, and funds with the intention to generate social or environmental impact alongside a financial return’ (Impact Management Project [IMP], 2021). Impact investing has received increasing attention worldwide since the 2013 G8 Social Impact Investment Forum in London. According to the Global Impact Investing Network (GIIN), they have four core characteristics: an intended social or environmental impact; expected return on capital ranging from near-zero to market rates; a range of asset classes; and systematic impact measurement and reporting.
We characterize impact investing as a hybrid practice combining elements of two field-level logics, philanthropy and finance (Casasnovas & Ferraro, 2022; Hehenberger et al., 2019). The philanthropy logic is associated with the broader societal logics of religion – as religious congregations pioneered charitable work and poverty relief – and community – reciprocity and ‘giving back’ to members of bounded social groups (Thornton et al., 2012). Its primary goal is to improve human welfare, addressing immediate needs and the root causes of social ills (Sulek, 2010). The pure form of philanthropy is unconditional, selfless giving, usually through donations to nonprofit organizations (NPOs). The finance logic, meanwhile, is rooted in the societal market logic of self-interested resource allocation for greater profits. The primary goal is maximization of financial returns, using various forms of debt and equity investments as key practices (Almandoz, 2012). Impact investing blends these two logics of relatively similar strength (Pache & Santos, 2013) by typically accepting positive social impacts as compensation for expected below-market financial returns. We view our empirical setting as an exemplar to contrast how individuals engage with hybrid practices relative to their pure counterparts (Kim et al., 2016) (see Table 1).
Ideal-types of institutional logics in impact investing.
Data collection
We collected data through semi-structured interviews with HNWIs from 2015 to 2018, focusing on informants’ life stories. A life story interview is ‘a qualitative research method for gathering information on the subjective essence of one person’s entire life’ (Atkinson, 1998, p. 3), including its main events, relationships and beliefs. To address access issues and power disparities specific to interviewing elite informants (Solarino & Aguinis, 2021), two of the authors leveraged the reputation of the French business school where they work. They used their contacts in a private bank to secure access to 20 French HNWI clients, alongside six alumni informants with similar profiles. All were French nationals with at least one permanent residence in France, selected on the criteria of having substantial created or inherited wealth, and a significant track record of ‘giving back to society’.
Personalized invitations were sent to 32 HNWIs and a first wave of in-person interviews was organized between December 2014 and July 2016 with the 26 individuals who accepted. We then focused on ‘polar types’ (Eisenhardt, 1989) and used purposive sampling criteria to select 14 individuals who had been exposed to impact investing before our first interview (see Table 2). They all agreed to a second wave of interviews in 2017 and a third in 2018 to collect more details. The remaining 12 individuals were not included in these subsequent interviews. However, despite their lack of exposure to impact investing, they allowed us to gather information about the lives of HNWIs and to see patterns of responses emerge early in the data collection process.
Overview of the 14 individual cases.
We conducted interviews in private, quiet and familiar locations to create trust and rapport with informants. Our initial interview guide contained questions about their childhood, education, personal and professional experiences, representations and existing practices of giving and investing. In subsequent interviews, we revisited unanswered questions and went deeper into already-discussed and sensitive matters. We also asked about recent changes in their representations and practices. When possible, we triangulated our interviews with secondary data about informants found online, including biographical notes, portraits, as well as written and video interviews. About half of our informants were public figures with such data available, but it was more challenging to triangulate for the others. As sensemaking is both an ongoing and retrospective activity by nature (Weick, 1995), combining retrospective and real-time accounts was key to mitigate informants’ hindsight bias and impression management (Eisenhardt & Graebner, 2007). In total, 54 interviews were conducted (26 in the first wave, 14 in the second and third), recorded and fully transcribed, providing 1,400 pages of data.
Data analysis
Data analysis focused on the 14 informants who were exposed to impact investing, whom we interviewed three times. First, we wrote 20-page biographies for all informants, using consistent, comparable themes: childhood; education; religion and spirituality; civic life; political philosophy; career; experience with investing, giving and impact investing. This revealed that informants’ relationships to the finance and philanthropy logics significantly influenced their view and practice (or non-practice) of impact investing.
Next, based on the biographies, we coded informants’ degree of adherence to each logic using Pache and Santos’ (2013) typology which theorizes adherence as relating to ‘availability’ (knowledge about a given logic), ‘accessibility’ (how easily the knowledge comes to mind) and ‘activation’ (how far the knowledge is used in social interaction). Novice individuals have almost no knowledge about a logic, due to a lack of exposure and socialization; familiar individuals have experience-based knowledge of the logic that is moderately accessible and activated; identified individuals likewise have experience-based knowledge, but also developed a strong connection to the logic and feel emotionally and ideologically committed to it, making the logic highly accessible and often activated. We analysed availability, accessibility and activation of the philanthropy and finance logics for every informant. The first two authors independently coded each case, compared results and discussed divergences until they reached a satisfactory level of agreement (Denzin, 2017). Table 3 presents an overview of the coding procedure for two sample cases.
Overview of the logic adherence coding procedure for two illustrative cases.
Finally, we conducted a systematic, comparative examination of our 14 informants’ life stories, relationships to logics, and response to impact investing. We discovered common patterns amid biographical differences. All 14 individuals had practised financial investments and charitable giving as separate activities before being exposed to the hybrid practice of impact investing. Upon encountering it, they followed similar sensemaking processes involving Weick’s (1995) three interconnected stages. First, the novelty and ambiguity of this hybrid practice prompted the sensemaking process. Second, they interpreted impact investing by comparisons with pure practices of investing or giving. Finally, they took action: ignoring, rejecting or adopting it.
Of our 14 cases, one ignored impact investing and seven rejected it, keeping all their giving and investing activities separate. Six, however, were willing to adopt impact investing or had already done so. Three individuals changed their responses between the first and final interviews. For instance, one adopter (Bob) stopped because he felt he was getting too old for long-term investments and wanted to give away more money now. Interestingly, adopters and non-adopters were of various age, sex and type of wealth, suggesting that basic demographic and wealth characteristics were not associated with specific responses. Below we summarize five life stories representing the main observed response patterns to impact investing. We then present the key mechanisms at the ‘noticing cues’ and ‘creating interpretation’ stages.
Five Life Stories
Monique
Monique was an heiress in one of France’s wealthiest families. The family was enormous, ‘so you had to know how to share’. In childhood, she witnessed her relatives giving money to the poor, local churches and charities. Although critical of the French Catholic Church, describing herself as ‘a bit of a rebel’, she remained committed to its values, calling them her ‘foundations’ for living a good life.
Despite coming from an extended family of retail entrepreneurs, Monique did ‘not belong in the business world’. She had no business training or experience and was not involved in managing the family businesses. She was happy as a ‘passive shareholder’ while ‘a big family office [took] care of [her] finances’, because she was ‘not very interested’ in doing so. She worked as a medical imaging technician for nine years and enjoyed the job because of ‘the human relations’. In 1995, after a personal tragedy, she quit her job and started ‘healing’ before volunteering for several NPOs, raising funds, managing volunteers, and initiating new programmes. In the early 2000s, she intensified her philanthropic practices ‘to take responsibility for [her] global legacy’. She gradually became a proactive philanthropist, launching a joint grantmaking vehicle with her siblings in 2007, becoming chair of the family foundation in 2009 and speaking publicly about philanthropy.
Monique discovered impact investing in 2013 at a professional conference organized by a group of foundations. When we first interviewed her in 2015, she had also heard about it from other philanthropists, and had been approached by two impact investing funds. She ignored the practice, puzzled by the combination of philanthropy with finance, a domain she knew very little about.
Gary
The son of a senior civil servant, Gary was raised along with two brothers in a prosperous city near Paris. In his first interview, Gary remembered a happy childhood ‘in a practising Catholic family. His parents were ‘very strict about [. . .] respecting certain values’, cited in all his three interviews: respect, tolerance, openness and generosity. While he ‘moved away from religious practice’ as an adult, Gary remained influenced by Catholic values, considering them ‘mystical’.
Gary graduated from a prestigious French engineering school in 1976. He started working in consulting ‘to fully understand the different aspects of the business world’, and gradually climbed the corporate ladder over 30 years in the same firm. He became a partner in 1987, then chairman of the French branch in 1995. The firm grew about 30 percent yearly during his tenure and went public in 2001, making him a multimillionaire. Although he loved his job, he questioned his newfound wealth as ‘a form of social injustice that should make you think, and therefore encourage you to give back’. Gary realized it was time to turn the page.
At 51, he retired from consulting, started volunteering and in 2006 became chair of a tech education NPO for disenfranchised students in South-East Asia. The work was almost full-time, like ‘a second career’. In 2008, he created a private foundation to fund education NPOs and collect donations from his professional and personal networks. Gary admired selfless giving, in contrast to the selfishness that often comes with making a fortune: ‘I think it’s beautiful to do things for free.’ Giving back became much more interesting to him than managing his wealth: ‘I try to deal with it as little as possible. [. . .] I delegate my investments and stick to low-risk products.’
While raising funds for his NPO, Gary came across impact investing in 2012 when potential funders recommended transforming his NPO into a commercial venture that could attract impact investments. Yet Gary believed that education should be free for the poor, funded by the State or donation-based NPOs. He rejected impact investing because he preferred giving to remain ‘pure’ and disinterested.
Zack
Born in Morocco to a French mother and a Moroccan father, Zack had 20 siblings from two marriages and adoptions. His father was a successful agribusiness entrepreneur who built one of Morocco’s largest private conglomerates. Zack described his childhood as ‘very privileged’ and his father’s leadership and community engagement as ‘deeply influential’. He recalled a childhood visit to a shantytown as ‘a shock’ and described his ‘growing anger’ towards injustice that led him to write ‘a plan to reform Morocco’ at age 12. With Catholic and Muslim parents, Zack developed an eclectic approach to faith: ‘I made my own religion in the end. [. . .] I consider myself a Muslim, a Jew, a Christian, a Buddhist, whatever.’ He felt spirituality was undervalued in today’s age.
After French high school in Morocco, Zack went to an elite American university in 1999, majoring in finance and organizational behaviour. However, he became very critical of the financial industry: ‘This system doesn’t work, it’s based on speculation and is destructive of real economic value.’ He began his career as a management consultant in New York, then after a first venture in China returned to Morocco in 2006 to restructure the family business, eventually becoming its CEO in 2010. He launched ‘integrated socio-economic projects’ with small producers, realizing the power of aligning business objectives and social impact. However, other family members were less enthusiastic. Frustrated, he left for Paris in 2013, took some time off, and pledged to fully engage with ‘impact-driven projects’.
Zack attributed this growing interest to the example of his mother, who had created a foundation for abandoned children in Morocco. He had regularly donated to large educational NGOs but was ‘disillusioned with the philanthropic sector’, citing ego issues and rivalries. He stopped charitable giving in 2012 and turned to funding impact-driven ventures instead. When we first met Zack, he had just decided to practise impact investing: At the time, I didn’t know the term impact. In fact, it was [my private banker] who told me ‘Well, what you want to do is called impact investing’. I said ‘Great! So, it already exists, that’s very good!’
Duncan
Duncan grew up in a ‘fairly traditional family’ including several ‘executives at big companies’. He described his family environment as ‘Catholic and traditional’, connected to French nobility and characterized by cultural conformity. Duncan went to a leading French business school. Despite his urban upbringing, he developed a strong bond with nature: We used to take the northern highway, and I cried every time I saw Roissy airport being built and extended on the farmland north of Paris. I thought: ‘Soon, there’ll be no more countryside’.
This interest, however, was not reflected in his career path. On graduating, Duncan ‘didn’t know what to do’ and went into banking, first investment banking, then a pioneering private equity firm in Paris. He became passionate about his job. He enjoyed spending time with entrepreneurs and exploring how to grow their business. He spent 28 years in the same firm as a leveraged buyouts specialist, partner, then general manager, and bought the company with four associates in 2000, raising more than €2 billion from institutional investors.
Being extremely busy, Duncan developed a ‘check-writing’ approach to philanthropy. He was a regular donor to poverty relief NPOs but humbly called his giving ‘a slightly automatic, tax-deductibility gesture’. As his company prepared for its next funding round (2016–2020), he decided to step down. He had ‘done it all’ and had lost the excitement of the ‘gold-digging years’. He took time off to reflect in 2013, met a pioneering financier-turned-philanthropist, and realized that he, too, could apply his skills to the nonprofit sector. In 2013 he launched a foundation that grants €150,000 yearly to environmental projects. He also continued investing personally in mid-market companies. He discovered impact investing during this transition period when a friend working for an impact fund wanted him to invest, but rejected it as a ‘flawed’ form of investment with no clear-cut financial goal.
Lorenzo
Lorenzo grew up with five biological sisters and three adopted siblings in a medium-sized town in southeast France. His parents were ‘very other-oriented’, ‘left-wing Catholics’ who were not ‘very religious’ but always ‘welcoming to other people’. He admired his father and grandfather, both entrepreneurs. Lorenzo studied mechanical engineering in France, then Germany. In 1995, he returned to France to do an MBA, specializing in finance and marketing.
Lorenzo moved to Brazil in 1996, where he helped develop the Brazilian operations of a French automaker. He was shocked by the inequalities he saw, with starving favela children in streets where very wealthy families lived. He began supporting a local NPO promoting education for the poor. After two years, Lorenzo returned to France and launched his first venture, a web-mapping company. After three rounds of funding, he sold the company in 2002.
While starting to raise a family, Lorenzo co-founded another successful tech venture in 2003, an instant messaging application in the booming mobile phone market. In 2008, he moved to San Francisco to develop it further, eventually selling it to a major telecom firm for tens of millions of dollars. He then took time off to travel with his family and think about the next phase of his life. On returning to France in 2013 he took ‘a radical decision’: ‘From now on, my time and energy as an entrepreneur will be dedicated to projects that have a social impact.’
Lorenzo learned about impact investing from his asset manager, who suggested it could combine his social impact ambition with his wealth management. He enthusiastically adopted the practice in 2013, joining a French impact fund’s board and investing directly in a few ‘social startups’. He hoped to transition towards a portfolio consisting entirely of impact-driven financial investments, while launching his own impact-driven venture in 2015.
Key Sensemaking Mechanisms
Our findings show that HNWIs responded differently to exposure to impact investing. For example, Monique failed to notice the practice, then ignored it; Gary and Duncan noticed it but rejected it; Zack and Lorenzo noticed it and adopted it. Table 4 (in the Appendix) presents an overview of findings for all 14 cases. Our comparative analysis suggests that these diverse responses can be explained by the different ways individuals engage in the sensemaking stages of noticing cues and creating interpretations.
Noticing cues indicating impact investing: The cognitive limitations of ‘novices’
Our data suggest that 13 of our 14 HNWIs noticed impact investing and recognized it as a specific practice, connecting cues from their environment with their own experience of giving and investing. Lorenzo had little trouble recognizing it. His private banker introduced him to the practice, which was not dissimilar to familiar investment practices. ‘I raised $15 million for my different ventures, so I know what investment is’, he explained. Additionally, it resonated with the goals of charitable giving, which he had practised since living in Brazil. Being familiar with both the finance and the philanthropy logics, he recognized impact investing right away: ‘When I realized that [a French impact fund] was already doing just that, wow, I said I was going to invest in [this fund] instead of doing it myself!’
Max distinguished impact investing from philanthropy and socially responsible investment (SRI), which he viewed as related, yet different practices. Max never adopted impact investing: he ‘went to see’ for himself and ‘wasn’t too sure’ about the impact funds he examined.
In contrast, Monique failed to notice the cues for impact investing. She first encountered the concept at a 2013 conference and had been approached by two impact funds by 2015, but still expressed a sense of perplexity and anxiety in our interviews. When asked for her views on impact investing in the second interview, she acknowledged confusion: I find this very problematic. There was CSR, social entrepreneurship, now there’s this whole movement to make so-called ‘classic companies’ better, with social innovation and CSR. We’re now talking about B-Corps. [. . .] Everybody’s confused, because we no longer know what world we are in.
Although she had often ‘heard’ of the practice, she did not understand what it meant and seemed unable to distinguish it from the loosely related practices she cited, e.g. CSR, B-Corps, social entrepreneurship. She appeared unable to recognize the key characteristics or interpret impact investing.
Our comparative analysis suggests that Monique was the only HNWI in our sample who was a novice in the finance logic. She had neither business training nor experience with investments, since a family office managed all her assets. When asked about investing more generally, Monique said: ‘I’m not an investor. I don’t really care about investing, and I don’t know how to do it.’ She believed investing ‘would take time and generate anxiety’. A lack of knowledge of basic finance principles prevented Monique from understanding what impact investing was. Being unable to assess it, she simply ignored it.
No other informant was a novice in either finance or philanthropy. Valerie and Alfred also had a limited understanding of impact investing, which was new to them at the time of our first interview. However, their familiarity with both philanthropy and finance, gained through their business education and careers, meant they could make sense of it after exposure. Our data thus suggest that being a novice in at least one of the combined logics may hamper the sensemaking process for a hybrid practice, by preventing individuals from noticing cues and moving to the next stage.
Creating interpretations of impact investing: The role of comparisons and adherence to logics
Except for Monique, all our informants noticed impact investing and went on to create interpretations. This first involved comparing the hybrid practice with a known, related pure practice. Interestingly, they spontaneously used only one analogy, interpreting it as either an alternative to charitable giving or an alternative to investing. This use of giving or investing as a reference practice was apparently influenced by the context of each informant’s exposure to impact investing, particularly the way impact investing was presented to them, and the goals they were pursuing with their wealth at the time. For example, Ricky came across it at a conference where it was presented as a modern philanthropy practice, so he considered it as complementary to his giving. Danielle discovered impact investing during a field trip while looking to divest her foundation’s assets from fossil fuels, so she chiefly compared it with traditional asset management practices. Based on their comparison with a reference practice, the HNWIs formed a judgement about impact investing, whose acceptability was difficult to assess due to its novelty and ambiguity.
Comparing impact investing with giving or investing
When Gary was encouraged to engage in impact investing while he was soliciting donations for his educational NPO, he compared it with charitable giving and reached the clear conclusion that it is an inferior, unacceptable alternative: Giving is giving. Getting paid for a gift? Well, that’s dubious [. . .]. I think commitment and generosity are very important things and I find it ethical to keep them strong and pure.
Alfred, Max, Ricky, Valerie and Zack also compared impact investing with charitable giving. Zack, a former donor to large NPOs, had ‘almost stopped talking to people in the charity world’. Unlike Gary, he viewed impact investing as a positive alternative addressing some of philanthropy’s flaws. He saw it as ‘the only place where [he] really found coherence’ between economic and social value creation.
The seven remaining informants also used comparisons to make sense of impact investing, but they chose conventional investing as the reference practice. Duncan explained: ‘I don’t understand this idea of making money, but not too much. I don’t know what return we are talking about.’ Later, he elaborated: ‘Who decides that three percent is a good return and four percent is bad?’ He used his financial expertise to assess impact investing’s characteristics (e.g. a ‘limited’ return on investment) by reference to mainstream finance practices. Charles and Vincent also compared impact investing with conventional investments and found it flawed as a financial practice. Vincent, a seasoned turnaround investor and philanthropist, had discovered impact investing years ago when it was emerging. In our first interview, he said he avoided it as ‘too risky an investment’ since he favoured ‘capital protection’ in his asset management strategy. Lorenzo, however, considered impact investing clearly superior to traditional investments. Having pledged to dedicate both his wealth and entrepreneurial skills to social impact, impact investing was ‘exactly what [he] wanted to do’. Bob, Danielle and Mary arrived at a similar interpretation, based on positive comparisons with traditional investments.
The comparison pattern was consequential. Comparisons with charitable giving made the philanthropy logic salient, while comparisons with conventional investing made the finance logic salient, and the subsequent interpretation of the hybrid practice was influenced by the HNWIs’ degree of adherence to the salient logic.
How identification with philanthropy or finance drove rejection of impact investing
When compared with giving, impact investing generated negative assessments from four informants. Their biographies suggest a strong identification with the philanthropy logic through their upbringing and various charitable activities. Gary expressed a ‘mystical’ attachment to Catholic values and associated excessive wealth with ‘injustice’. He criticized wealthy people who preferred impact investing to charitable giving, because that put ‘even more pressure’ on nonprofit actors. We heard similar arguments from Alfred and Valerie, two other donors who emphasized the purity of selfless giving, aligning with Catholic prescriptions about charity being the ‘greatest theological virtue’. They found impact investing unacceptable because it attached a financial return to social deeds, which was incompatible with the virtue of sacrifice stressed in Catholic dogma. As Alfred said: It’s probably my Judeo-Christian education. You shouldn’t give to someone and ask something in return. A gift is a gift. [. . .] Using a business, capitalist reasoning in the field of philanthropy seems vulgar to me. It’s another world.
When compared with ‘pure’ investing, impact investing was rejected by three informants. Duncan, Charles and Vincent were professional investors who spent decades working in private equity, brokerage and turnaround investing and thus strongly identified with the finance logic. This generated a robust adherence to core financial tenets, such as profit maximization. Duncan interpreted impact investing negatively because it conflicted with key norms and values of the finance logic. Though impact investing intrigued him, specialist conferences and discussions with acquaintances left him unconvinced: I have a hard time abandoning financial results as the main performance criterion. Dropping that criterion jeopardizes the future of the company. [. . .] And I don’t see who will decide and why it should be good to make a five percent return on investment, and bad to make eight percent.
Charles, too, could not fathom abandoning profit maximization: When you do [impact investing], you don’t know what the return will be. When I invest, normally, the point is to get a return. [. . .] It isn’t philanthropy. It’s business first, it’s making money.
Overall, our data suggest that HNWIs who identified with the logic made salient by the comparison formed negative assessments of impact investing, as it deviated from the ‘pure’ reference practice and the values associated with the taken-for-granted logic. They went on to reject the hybrid practice.
How familiarity with logics drove adoption of impact investing
In stark contrast, we found that the six informants who positively assessed impact investing were all familiar with the reference practice’s logic. For example, Zack was merely familiar with philanthropy. As a regular donor and son of a philanthropic foundation founder, he was aware of its good and ‘dark’ sides. His knowledge of the philanthropy logic afforded him sufficient understanding of its prescriptions without taking them for granted. He did not manifest the emotional attachment to philanthropy that characterized identified informants like Gary. He evaluated the hybrid practice positively: Impact investing means I’m fully committed. . . I’ve finally found this coherence. If I’m doing impact investments, my whole activity is logical, coherent, with this idea of creating two sorts of value.
Of the HNWIs who used conventional investments as references, Lorenzo did not experience the cognitive constraints affecting the finance professionals. As a tech entrepreneur, he had first-hand investment experience: ‘I’ve been on the other side [. . .]. I did 10 fundraising rounds with investors.’ He was familiar with the finance logic but did not take its core norms for granted and seldom activated it, unlike professional investors. He encountered impact investing through his private bank, and approached it with an open mind. Similarly, Bob, Danielle and Mary were familiar enough with the finance logic to understand impact investing, while being moderately detached from its prescriptions and open to the novelties of the hybrid practice. For Danielle, this was ‘an interesting, intelligent, fair solution that should be encouraged’ because it allowed her to align her environmental activism and her foundation’s asset management.
Not all the HNWIs who evaluated impact investing positively took the same action. Ricky and Danielle had trouble finding suitable investment opportunities – although Danielle succeeded between our first and second interviews. Together with Mary and Bob, they viewed impact investing as ‘another tool in the toolbox’ alongside their traditional philanthropic and investment activities. In contrast, Lorenzo and Zack fully embraced the hybrid practice and pledged to progressively make all their giving and investing through impact investing. While these nuances may be explained by personal differences (e.g. age, experience, opportunities), the common thread between all adopters was their familiarity with the logic associated with the reference practice used. It enabled them (unlike novices) to recognize impact investing and (unlike individuals who identified with the salient logic) to judge it positively, opening the door for its adoption.
Discussion
Our study investigates how individuals make sense of hybrid practices combining different institutional logics of relatively similar strength, and the mechanisms behind their responses to such practices. Ignoring, rejecting or adopting hybrid practices are the three possible outcomes of a sensemaking process that exposure to such practices triggers (Maitlis & Christianson, 2014). Hybrid practices are ambiguous as they deviate from taken-for-granted templates of the underlying pure practices, combining elements whose fit may not be easily understood (Wry et al., 2014). For individuals encountering them, they are not only new but also ‘institutionally novel’, facing the risk of being neither understood nor accepted (Gümüsay & Smets, 2020). We explore how individuals react to these cues and create different interpretations.
We uncover key mechanisms in the sensemaking process for hybrid practices. First, we identify the crucial role played by individuals’ adherence to the logics involved (Pache & Santos, 2013). Upon exposure to a hybrid practice, individuals differ in their responses. Novices with either logics have trouble noticing cues of the practice. They ignore it because they simply do not understand what it is and how elements fit together. Lacking basic knowledge with at least one of the logics, their sensemaking stops here. Being familiar or identified with the two logics, in contrast, enables individuals to recognize enough elements of the hybrid practice to move to the interpretation stage. Second, to create interpretations, these individuals compare the hybrid practice with one of the pure (i.e. generic, nonhybrid) practices associated with the combined logics (Kim et al., 2016). The reference practice used depends on the context in which people were first exposed to the hybrid practice, and makes one logic more salient than the other (Greenwood et al., 2011). Next, individuals’ assessment of the hybrid practice’s acceptability depends on their degree of adherence to the salient logic. Individuals identified with it negatively evaluate the hybrid practice and prefer its pure counterpart, because they are cognitively and emotionally attached to the logic (Thornton et al., 2012) and take its prescriptions for granted. But individuals familiar with the salient logic both understand the elements being combined and consider their combination suitable, paving the way for adoption where opportunities exist. The key contextual mechanisms affecting the sensemaking process are presented in Figure 1.
A model of individual sensemaking of hybrid practices.
Our study sheds light on the recursive relationship between sensemaking and institutions, answering calls for deeper research at the intersection of both theoretical traditions (Maitlis & Christianson, 2014). By connecting the institutional logics ‘meta-theory’ (Pache & Thornton, 2020) with the sensemaking perspective, our study makes contributions to both.
Contributions to sensemaking
Sensemaking research has been criticized for neglecting the role of institutional contexts in explaining individual cognition (Weber & Glynn, 2006). While scholars have acknowledged institutional influences on sensemaking, the few studies that ‘have empirically investigated how this influence may occur’ (Sandberg & Tsoukas, 2015, p. 16) have focused on ‘transformative mechanisms’ (Weber & Glynn, 2006), i.e. how sensemaking generates change in organizational and field logics (Bévort & Suddaby, 2016; Jay, 2013; Nigam & Ocasio, 2010). They view sensemaking as the ‘feedstock for institutionalization’ (Weick, 1995, p. 35), as actors (re)produce institutions through sensemaking.
Conversely, our study unveils key ‘contextual mechanisms’ by which institutions influence individuals’ sensemaking (Powell & Colyvas, 2008). As Weber and Glynn (2006) suggested, this influence is not limited to cognitive constraints upon sensemaking. Institutional logics can also be seen as steering individuals’ interpretations of violated expectations. By studying individuals’ responses to new hybrid practices, we provide a nuanced account of how their adherence to logics not only constrains and enables, but orients their sensemaking (Cardinale, 2018), and show the diverging paths that novices, and individuals familiar and identified with the salient logics, follow in the process.
In particular, we unpack the ‘creating interpretations’ stage (Maitlis & Christianson, 2014) and identify two related sub-processes. First, individuals exposed to hybrid practices compare them with a related ‘pure practice’, i.e. a generic, nonhybrid practice associated with one logic involved (Kim et al., 2016), making this focal logic salient. Second, they assess hybrid practices’ acceptability based on their adherence to the salient logic. Our informants used analogies such as ‘reusable donation’ or ‘ethical way of investing’, that made either the philanthropy or the finance logic salient and oriented their assessment. While analogies are crucial drivers of sensemaking (Cornelissen, Holt, & Zundel, 2011), allowing ‘actors to take the insight developed in one context and apply it to a new setting’ (Gavetti, Levinthal, & Rivkin, 2005, p. 693), analogical reasoning has been surprisingly absent from empirical sensemaking studies. We argue that to make sense of hybrid practices, individuals compare them with known, established, pure practices that help overcome cognitive novelty. They ‘reach into their repertoire of experience’ (Powell & Colyvas, 2008, p. 293) and ‘choose from their set of existing understandings and actions’ (Hargadon & Douglas, 2001, p. 478) to transfer this knowledge to the hybrid practice, which is then assessed as an (in)appropriate alternative, depending on their adherence to logics.
Contributions to institutional theory
While institutional theory holds an implicit individual-cognitive component, scholars have often neglected individual interpretation and subjectivity (Bévort & Suddaby, 2016). An emerging research stream has adopted an individual-cognitive approach to account for differing individual responses to multiple logics (Pache & Santos, 2013; Voronov & Yorks, 2015). Building upon that work, we propose that the sensemaking perspective illuminates how individuals manage the multiple and often incompatible demands of multiple logics. Their sensemaking differs because people have diverse life stories encompassing personal, public and work experiences (Voronov & Yorks, 2015). We point to the importance of institutional biographies, i.e. ‘the exploration of specific individuals in relation to the institutions that structured their lives’ (Lawrence et al., 2011, p. 55), as an analytical tool to unpack how individuals make sense of hybrid practices. It requires exploring the intimate connections that individuals developed with relevant logics in their personal or professional experience, and assessing the degree to which they have developed adherence to these logics. This may be shaped by the frequency of an individual’s interactions with a logic (i.e. how often she has interacted with it) as well as with the intensity of such interactions (i.e. how deep are her cognitive and emotional connections to it).
Specifically, we contribute to institutional theory by highlighting the role of individuals’ degree of adherence to logics in making sense of hybrid practices. For novices with at least one of the logics involved, even discerning the practice is difficult and sensemaking stops at the ‘noticing cues’ stage. This finding contrasts with Battilana and Dorado (2010), who emphasized the importance of fully novice individuals (‘blank slates’) for sustaining the hybrid practice of microfinance. In the organizational context of microfinance, novices were receptive to socialization into the hybrid practice. In our study, individuals were not embedded in an organizational setting, so there was no systematic socialization or discursive activity about impact investing. In extra-organizational contexts, where individuals are highly dependent on personal experiences, novices struggle to make sense of practices combining elements that they have not been exposed to. Because they lack connections in their biographies with one or both logics at play, their understanding of the situation and their ability to respond is very limited.
Our findings further show that identification with logics generates logic-based resistance to hybrid practices. Embeddedness in particular institutional fields spurs cognitive adherence and emotional attachment (Friedland, 2018), potentially triggering virulent resistance (Malhotra, Zietsma, Morris, & Smets, 2021). Identifying with the salient logic influences individuals to reject hybrid practices in favour of an ‘ideologically pure’ alternative (Boone & Özcan, 2016). In contrast, our analysis shows the power of mere familiarity with the salient logic in driving adoption of hybrid practices. Familiarity with multiple logics affords individuals sufficient understanding of their different prescriptions, without the taken-for-grantedness and emotional attachment of identification. Logic-familiar individuals escape both the constraints of identification (i.e. ‘too much’ adherence) and the cognitive limitations that characterize novices (i.e. ‘too little’ adherence). This makes them particularly likely adopters of hybrid practices.
Our study complements existing research on individual responses to hybridity in important ways. First, it challenges existing theoretical models suggesting that individuals identified with logics are in a better position to embrace hybrid practices (Pache & Santos, 2013; Wry & York, 2017). More specifically, our empirical results contradict two key predictions from Pache and Santos’ (2013) model of individual-level responses to competing logics. First, while they predict that individuals identified with two logics are likely to be able to combine them in a sustainable way because they are ‘committed to see them both prevail’ (p. 26), we instead find that identification with logics – more precisely, with the one associated with the reference practice – may be an obstacle to their combination. Second, they predict that individuals that are familiar with both logics are unlikely to bring them closely together because of ‘their lack of commitment to either of the logics’ (p. 20). In contrast, we find that familiarity with logics, i.e. having an intermediate degree of adherence with them, is key to viewing their combination positively. We further nuance Wry and York’s (2017) study, which proposes that the individuals most likely to create a hybrid social enterprise, combining social and commercial logics, are those who strongly identify with both logics through their role identities. We suggest that it may be necessary to further assess the degree of adherence (familiar or identified) with the logics – associated with role or personal identities – to better predict the likelihood of embracing a hybrid practice. Our study further extends both theoretical models by highlighting the importance of logic salience in individuals’ responses, a dimension that they do not discuss.
Our study has important implications for institutional entrepreneurs (Battilana, Leca, & Boxenbaum, 2009) engaged in creating and diffusing hybrid practices. Balancing novelty and familiarity (Hargadon & Douglas, 2001), promoters of hybrid practices can encourage their adoption by manipulating the reference practice that specific individuals or groups may use for comparison. This requires an awareness of subjects’ institutional biographies, to anticipate their relationships with the logics involved and thus use appropriate analogies. In our setting, a population of professional investors could be more receptive to the concept of ‘venture philanthropy’ than ‘impact investing’, (Hehenberger et al., 2019) as the name foregrounds the philanthropy logic instead of the finance logic, potentially reducing resistance from financiers attached to ‘pure’ investment practices.
Boundary conditions and future research
An important boundary condition of this study is that it focuses on individuals’ responses to multiple institutional logics in their personal lives, outside of a formal organizational context. As such, they may face a different array of institutional influences than individual members of organizations. They may draw more heavily on ‘personal narratives of their relationships to relevant institutional logics’ (Bertels & Lawrence, 2016, p. 369) and may be less influenced by the field-level logics that structure organizational life (Jay, 2013). In addition, unlike members of an organization, independent individuals’ sensemaking cannot involve discursive activity among workplace colleagues, which is usually key for intersubjective meaning construction (Maitlis & Christianson, 2014). The mechanisms we highlight are thus bounded by this extra-organizational setting (Voronov & Yorks, 2015). Future research could thus fruitfully explore how individuals, in organizational contexts, make sense of hybrid practices, to assess whether and how the social structures and institutional dynamics inherent to an organization alter the sensemaking process that we uncovered.
While we were able to collect rich, intimate data from elite informants, only one informant was a novice with one of the logics involved, limiting our general claim that novices stop at the early stage of the sensemaking process. Future research is needed to confirm our findings and to explore hybrid practices in other settings. For instance, it would be interesting to compare various stakeholders’ responses to the hybrid practice of Islamic banking, and explore the influence of their personal relationships to the market and religious logics (Gümüsay & Smets, 2020). The ‘staying power’ of the mechanisms highlighted here could also be investigated, as a given hybrid practice spreads and becomes more prevalent over time. In addition, settings in which there is not one, but several pure practices associated with each logic, or in which a hybrid practice combines more than two logics, would allow to refine and strengthen our model.
Finally, future research could explore potential moderators between individuals’ adherence to multiple logics and their responses to hybrid practices. Our anecdotal evidence suggests that some individuals (Lorenzo and Zack) want to fully replace established pure practices with hybrid ones, while others are happy to use them occasionally alongside pure practices. Psychological traits like integrative complexity (Suedfeld, Tetlock, & Streufert, 1992) and tolerance for ambiguity (Furnham & Ribchester, 1995) may moderate the relationship between adherence to a logic and adoption of hybrid practices: for instance, higher integrative complexity could reinforce the influence of familiarity (i.e. intermediate adherence) on hybrid practice adoption. Integrating such psychological constructs could be germane to explaining ‘individual differences in their ability to interpret and interact with the cognitive effects of institutions’ (Bévort & Suddaby, 2016, p. 19)
Conclusion
In our increasingly complex world, hybrid practices are likely to proliferate. Understanding how individuals respond to such practices is necessary to predict whether and when they will be adopted, ignored or rejected. Our case study of individuals exposed to impact investing shows that comparisons with pure practices and adherence to logics significantly orient the sensemaking process triggered by exposure to hybrid practices. We show that being merely familiar (i.e. having only intermediate adherence) with the logic associated with the reference practice used is conducive to the adoption of hybrid practices, whereas being novice (no adherence) or identified (high adherence) may prevent individuals from, respectively, noticing or accepting them. These findings not only contribute new insights to the institutional and sensemaking literatures, they also have valuable practical implications for promoting hybrid practices.
Footnotes
Appendix
Main findings for the 14 individual cases.
| Case | Adherence to logics | Stage 1: Noticing cues indicating |
Stage 2: Creating interpretations of impact investing | Stage 3: Taking action with impact investing | |
|---|---|---|---|---|---|
| Comparing impact investing with: | Assessment of impact investing’s acceptability | ||||
| Alfred | • Identified with philanthropy • Familiar with finance |
• Heard about II in conversations with social entrepreneurs, but ‘it’s a bit remote from [him]’. | Giving (philanthropy logic) • Was dubious about wanting a return for funding social causes: ‘A gift is a gift. [. . .] You trust people, and you don’t ask for results.’ |
Negative • Mentioned his Judeo-Christian education and values to oppose the principles of II. • Found it ‘vulgar’ to use ‘capitalist reasoning in the field of philanthropy’. |
Rejects II • Philanthropy and business were two different worlds for him. His only investments were in real estate and his hospitality business. Focused giving on three or four projects only. |
| Bob | • Identified with philanthropy • Familiar with finance |
• Around 1995, was offered a first opportunity to invest in an NPO’s real-estate subsidiary. • Considered II an umbrella term for investments in various social-purpose entities: social housing, charitable mutual funds, cooperatives, etc. |
Investing (finance logic) • Viewed II as an alternative to mainstream investing, providing financial tools with a social purpose. • Did not see II as a threat to giving, both seemed to him useful and complementary |
Positive • Saw II as a positive way to get more involved in his investments. • Saw II as more suited for the young and middle-aged, wanting to preserve capital in a long-term view. |
Adopts II • Since 1995, has held various II products in social housing and microfinance. • In parallel, continued donating significant amounts to many NPOs. • Since 2015, has transitioned towards exiting his II, preferring to ‘simplify [his] commitments’ for estate planning reasons. |
| Charles | • Identified with philanthropy • Identified with finance |
• Knew of SRI through negotiations with pension funds; his daughter has been an ESG analyst since 2011. • Thought of SRI when asked about II. Did not fully understand the difference between SRI and II before our first interview. |
Investing (finance logic) • Viewed II as a flawed financial activity, like SRI, because profitability is not maximized, and the criteria used are vague. • Saw II as totally unrelated to charitable giving, which he considered in another realm. |
Negative • Highly sceptical of the idea of limited ROI in return for social impact. • Found it impossible to define an acceptable return without the profit maximization rule. |
Rejects II • Separated his personal investments from his charitable giving. • Created his own foundation in 2007 after selling his investment company. Motivated to give to ‘have a clear conscience’ and to atone for the money he made by ‘taking advantage of the system’. |
| Danielle | • Identified with philanthropy • Familiar with finance |
• Discovered II in 2013 during a field trip to the UK with other foundations. Met with a prominent UK family foundation pioneering low-carbon investment strategies. • Sought to divest her foundation’s assets from fossil fuels. |
Investing (finance logic) • Came across II while looking for solutions to reinvest assets in clean energy, agroforestry, biodiversity. • Mostly considered II as ‘mission-related investments’ for her foundation. |
Positive • Very enthusiastic about II, ‘would love to do it’ but could not initially find suitable investment opportunities. • Considered II an interesting tool to achieve coherence in her foundation’s activities. |
Adopts II • Signed the Divest-Invest Pledge in 2015, the first family foundation to do so in France. • Invested in a Swiss II fund in 2017. Started ‘program-related investments’ in Cambodia, instead of grants. |
| Duncan | • Familiar with philanthropy • Identified with finance |
• As he was transitioning from his private equity career in 2013, discovered II through a friend working in an impact fund, who suggested investing in the fund. | Investing (finance logic) • Compared II with a ‘flawed’ form of investment, lacking a clear alternative to maximizing financial returns as the main performance criterion. |
Negative • Did not accept the idea of a ‘limited’ financial return. • Thought the distinction between ‘good’ and ‘bad’ return rates was arbitrary. |
Rejects II • Said he took a ‘binary’ view, in which the ‘business world’ and the ‘nonprofit world’ were very different and should remain separate. • Launched a grantmaking foundation and started funding environmental NPOs in 2015. |
| Gary | • Identified with philanthropy • Familiar with finance |
• Discovered II in 2012 when he met potential funders who challenged his NPO’s donation-based model, and wanted to invest instead. | Giving (philanthropy logic) • Viewed II as a threat to pure, selfless giving. ‘Giving is giving’ and should remain pure. Opposed to ‘getting paid back’. |
Negative • Cited Catholic values for his uneasy relationship to II. • Thought doing things for free – like giving – was beautiful. • Linked excessive wealth to injustice. Stressed the need for the wealthy to ‘give back’. |
Rejects II • Created his foundation in 2008 to raise and redistribute funds for educational NPOs. • Insisted he personally preferred giving for no reward. |
| Lorenzo | • Familiar with philanthropy • Familiar with finance |
• Discovered II in 2013 when he reviewed his asset management options and his private bank advisor proposed investing in a French impact fund. • After selling his tech company in 2011, wanted to dedicate all his time and wealth to projects with a positive ‘social impact.’ |
Investing (finance logic) • Clearly viewed II as an alternative to mainstream finance for his asset allocation. |
Positive • Liked the idea of investing in innovative ‘social startups.’ |
Adopts II • Immediately invested in and joined the board of the French impact fund discovered through his private bank. • Also invested directly in social enterprises. |
| Mary | • Familiar with philanthropy • Familiar with finance |
• Was introduced to II and discovered opportunities to invest in microfinance at her private bank. • Inherited substantial wealth in 2003 and wanted to invest it in ‘ethical financial products’. |
Investing (finance logic) • II related primarily to her asset management strategy after inheriting. |
Positive • Analysed II as an ethical way of investing, to avoid being ‘schizophrenic’ with her wealth. • Wished she could find more opportunities to practise II, as it remained marginal in her portfolio. |
Adopts II • Bought shares in a microfinance fund proposed by her private banker in 2004; still holds them and was pleasantly surprised by their performance in the 2009 financial crisis. • Invested in a French impact fund in 2010, following a recommendation from her advisor. |
| Max | • Identified with philanthropy • Identified with finance |
• Discovered II around 2014 while looking for ways to fund innovation in poverty relief. • Sought and examined II funds in France to understand their business model and portfolios. |
Giving (philanthropy logic) • II belonged ‘in the realm of giving’ for him, as a form of ‘reusable donation’ whereby the money could be used more than just once. |
Negative • Believed there was ‘confusion’ between charitable goals and financial vehicles. • Thought II could not help the neediest, who are by definition never ‘creditworthy’. |
Rejects II • Refused to invest in II personally. A ‘nice model’, but it should drop the name ‘investing.’ • Created a foundation in 2017 to fund and operate innovative solutions for extreme poverty. |
| Monique | • Identified with philanthropy • Novice in finance |
Ignores II • First heard of II in 2013 at a professional event; investing in II funds was suggested to her in 2014–2015. • Much confusion. Conflated II with loosely related practices mixing market and social elements (CSR, social enterprises, B-corps). • Low knowledge of and interest in finance, which may explain her difficulty making sense of II. • Did not practise II, personally or through her foundation. |
|||
| Ricky | • Familiar with philanthropy |
• Discovered II at conferences and from fellow philanthropists. |
Giving (philanthropy logic) |
Positive |
Adopts II |
| Valerie | • Identified with philanthropy |
• Mentioned social impact bonds and SRI as examples of II she learned about at professional banking or philanthropy conferences. | Giving (philanthropy logic) |
Negative |
Rejects II |
| Vincent | • Identified with philanthropy |
• Discovered II early (before 2010) from conferences and discussions with fellow philanthropists. | Investing (finance logic) |
Negative |
Rejects II |
| Zack | • Familiar with philanthropy |
• Exposed to II in 2014 at a private bank meeting with an advisor. Fell in love with the idea. Realized what he wanted to do already existed. |
Giving (philanthropy logic) |
Positive |
Adopts II |
Acknowledgements
We want to thank our editor Peter Walgenbach and the three anonymous reviewers for their helpful guidance and very constructive comments. We are grateful to all the fellow scholars who gave us timely feedback on early-stage versions of this paper, in particular to Joel Bothello, Tom D’Aunno, Lisa Hehenberger, Emmanuelle Fauchart, Santi Furnari, Alice Mascena, Wesley Sine, Wendy Smith, Patricia Thornton, Megan Tompkins-Stange and Virginie Xhauflair. We also thank the participants in the 2018, 2019 and 2022 Academy of Management Annual Meetings and in the 2018 and 2022 EGOS Colloquiums. Finally, we deeply thank the 14 informants who shared so much with us about their lives and their relationship to money and wealth.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
