Integrating competing institutional logics by benefit corporations: Challenges and practices

Abstract

Drawing on institutional logics, this study empirically examines challenges faced by benefit corporations that are at the crossroads of competing logics—need-based social logic to do right by society and demand-based market logic to generate adequate profit for sustaining operations—and the practices that such organizations adopt to manage these challenges to maintain their hybrid nature. Examining 30 benefit corporations from the United States, this study finds multiple sets of primary challenges and empirically specifies that benefit corporations should integrate competing institutional logics by actively managing both internal dynamics in the organizations and external relations to be successful. The article further identifies benefit corporations that were unsuccessful in combining both logics, and thus, has implications for both the literature and management practice.

Keywords

Benefit corporation institutional logics challenges practices

Introduction

The emergence of social businesses and their contribution to society and the economy has been well documented in the literature. Social businesses established to achieve a social mission are increasingly evident worldwide (Weerawardena et al., 2018). These businesses include conventional for-profits and non-profits. However, these businesses face an increasingly competitive and continuously evolving environment and need to achieve dual socioeconomic goals. Thus, in recent years, social businesses have increasingly assumed a hybrid form—for example, benefit corporations that incorporate elements from different institutional logics (Czinkota et al., 2020; Mion, 2020; Mion et al., 2021). The literature has highlighted how social businesses differ from the conventional non-profit and for-profit sectors. Specifically, the literature has discussed community enterprises, such as cooperatives and shareholder models, in the non-profit sector (Barraket et al., 2016; Weerawardena et al., 2010) and recognizes trial-and-error learning, knowledge management, dynamic capabilities, networking, and resource leveraging in the for-profit sector (Morris et al., 2005; Sosna et al., 2010). However, to date, limited attention has been paid to identifying the challenges faced by benefit corporations—a for-profit corporate form of business that creates environmental and social value along with financial profits (Santos et al., 2015; Schaltegger et al., 2016; Stubbs, 2019).

Notably, benefit organizations combine two separate institutional logics—a need-based social logic that guides the organization’s mission to do greater good for society through business activities and a demand-based market logic that requires adequate profits through business activities to support operations to fulfill fiduciary obligations (Battilana and Dorado, 2010). However, these organizations are often caught between competing demands from these two institutional logics, which are often not compatible with each other, given that integrating elements from one institutional logic over the long run often involves disregarding the demands of the other (Battilana and Dorado, 2010). Thus, with escalating incompatibility between these institutional logics, benefit organizations experience increased challenges. This topic remains understudied, with only a handful of studies published in this area (Nicholas and Sacco, 2017; Nigri and Baldo, 2018; Nigri et al., 2020). For instance, Battilana and Dorado (2010) demonstrated how two hybrid microfinance organizations, BancoSol and Los Andes, combined banking logic to thrive financially and development/social welfare logic to fight poverty.

Moreover, the juxtaposition of conflicting institutional logics raises tensions and creates challenges for benefit organizations as such organizations face the challenge of managing stakeholders tied to opposing logics (Battilana and Lee, 2014). These create governance challenges, as it can be difficult to sustain commitments to conflicting demands related to overseeing combined accountability (Nigri et al., 2020) and for benefit organizations and their employees’ ability to communally work on their social objectives and commercial performance (Cornelissen et al., 2021). However, the dearth of research on the types of challenges that arise and the various strategies for dealing with these make it difficult for organizations to understand the ongoing actions that benefit organizations need to sustain over time to successfully navigate these paradoxes (Stubbs, 2019).

By exploring this research area, this study makes multiple contributions. In emphasizing the interplay of both logics, this study provides empirical insights into the three sets of ongoing activities and associated practices that benefit corporations need to sustain over time to be successful, and thus answers the call for further research in this area (Diez-Busto et al., 2021). The findings, therefore, extend the existing research. Third, this study compares the approaches of benefit corporations that have failed to sustain their hybrid nature and hence offers important lessons for potential hybrid organizations to effectively manage the opposing institutional logics. Thus, this study responds to the call for more empirical insights into this emerging research area (Stubbs, 2019).

Literature review

The term institutional logic refers to the shared understanding of goals that can be considered legitimate and the ways in which these may be pursued. These logics guide decision-making by providing rules of action (Suddaby and Greenwood, 2005; Thornton, 2004; Thornton and Ocasio, 1999). Research has shown that competing institutional logics often coexist in organizations, involving different and perhaps contradictory demands on organizations (Greenwood et al., 2011; Thornton et al., 2012). Under a need-based logic (NBL)/need-based social logic, an organization engages in social goals through business activities that benefit society/community and create value for the environment, whereas a demand-based logic (DBL)/demand-based market logic emphasizes profit generation through business activities and operational effectiveness (McMullen and Warnick, 2016; Smith et al., 2013).

A social business is an organization created for an explicit social and environmental mission, mitigating a social problem or a market failure to address a significant unmet need of society (Bocken and Short, 2016a; Yunus et al., 2010). The primary aim of all social businesses is to generate the majority of their income through commercial activities to further their social or environmental mission. The overarching goal of social businesses is to create social value in institutional voids and deliver significant social impact for particular groups in society (Aggarwal et al., 2018; Bocken and Short, 2016a).

Social businesses can be change agents in both the for-profit and non-profit sectors (Praszkier and Nowak, 2011). For-profit organizations recognize and pursue new opportunities to meet socially impactful missions with a clear profit motive while implementing funding strategies to sustain and grow (Bocken and Short, 2016b; Praszkier and Nowak, 2011). Conversely, non-profit social businesses are self-governed, voluntary organizations separate from the government. Non-profits act for public benefit rather than shareholder benefit (Anheier and Salamon, 2006; Morris, 2000). In the 1980s and 1990s, social business mostly referred to non-profit organizations (Cummings, 2012). While non-profits influence social businesses, these organizations often suffer ongoing funding issues, depending on grants and unstable incomes (Bocken and Short, 2016b; Reilly, 2016). In contrast, an increasing number of for-profit organizations have adopted social missions similar to non-profit organizations (Stecker, 2014).

Benefit corporations blur the boundaries between non-profit and for-profit organizations by placing equal emphasis on their social objective (need-based social logic) and financial performance (demand-based market logic) (Mion, 2020; Mion et al., 2021). Benefit corporations are for-profit businesses with all the traditional corporate characteristics combined with societal responsibilities. They also self-report their social and environmental accountability and transparency by publishing annual impact reports (Nicholas and Sacco, 2017; Nigri and Baldo, 2018). According to Hiller, benefit corporations are rapidly growing in response to the low levels of trust in corporations and the rationale that social entrepreneurs should be less dependent on grants and donations (Hiller, 2013). Benefit corporations are located in both developed and developing markets and tend to be small-to medium-sized companies with fewer employees (McDonnell, 2014; Stecker, 2016). Benefit corporations can further opt into a voluntary certification process set forth by the B Lab organization (Haigh et al., 2015; Hiller, 2013). A benefit corporation can become certified by voluntarily meeting the required social responsibility levels set by B Lab. Certification requires benefit corporations to meet the highest performance standards, accountability, and transparency by receiving a minimum of 80 out of 200 points in the assessment (B Lab, 2021).

Institutional logics theory is increasingly being utilized to study how hybrid forms of social organizations, such as benefit corporations, include social, economic, and environmental goals in their business activities (Greenwood et al., 2011; Stubbs, 2017). Benefit corporations integrate demand-based market logic with a need-based social logic to simultaneously create social, economic, and environmental value (Jolink and Niesten, 2015; Steinz et al., 2016). Integrating competing logics is foundational to hybrid forms of organizations that seek to create value for a multitude of stakeholders (Battilana and Dorado, 2010; Greenwood et al., 2011). Battilana and Dorado’s study, for example, demonstrated how hybrid microfinance organizations combined banking logics to thrive financially and development/social welfare logic to fight poverty (Battilana and Dorado, 2010). In the Bolivian context, before the advent of microfinance, small loans for the disfranchised poor were available only from lenders such as pawnshops or loan sharks, because traditional for-profit financial institutions were skewed toward serving only affluent borrowers. Microfinance was initially considered a non-profit, and such institutions relied solely on donations for financing their activities. The hybrid nature of BancoSol and Los Andes enabled them to retain their development logic—provide loans to low-income individuals who were disfranchised from traditional financial institutions—and to maintain the banking logic—remain financially profitable and fulfill the fiduciary obligations of commercial, financial institutions. However, such organizations face the risk of mission drift because circumstances might divert these companies into prioritizing the banking (demand-based market) logic over the development (need-based social) logic.

While combining multiple logics can create important areas of innovation for benefit corporations, at the same time, these organizations can experience contradicting demands and continued pressures from institutional referents to conform to diverse norms (Jay, 2013), which creates challenges in managing their social mission and business activities (Smith et al., 2013). Unlike mature organizations where institutional prescribed conventional forms are well established, it is challenging for benefit corporations to manage the demands of the divergent logics with requirements imposed by multiple institutional logics (Stubbs, 2017). In threatening their hybrid natures, these conflicts can potentially lead to mission drift and goal displacement (Battilana and Lee, 2014). Hence, this study is significant as it is important to conduct further research in this area. This study utilizes the interpretive lens of institutional logics to provide insights into how benefit corporations manage challenges at the crossroads with competing institutional logics.

Methodology

With the paucity of empirical research on benefit corporations managing the paradox of integrating social and economic goals, an exploratory qualitative research approach was appropriate (Belz and Binder, 2017). To obtain a wide-ranging understanding of the benefit corporation landscape, benefit corporations from various states in the United States were approached that are operating in diverse industries. Thirty benefit corporations agreed to participate in the study. To identify the performance of each benefit corporation, along with interviews, information from company reports and websites was analyzed. 40 in-depth, semi-structured interviews were conducted with the assigned members of the company. This was beneficial to obtain a deep understanding (Edmondson and McManus, 2007; Eisenhardt, 1989; Yin, 2013) of the context (Dyer and Wilkins, 1991). The field sites of the 30 benefit corporations were chosen to provide a broad and representative sample of successful benefit corporations, which range in size, to help find common themes of challenges faced by benefit corporations that are at the intersection of competing logics and the practices that such organizations adopt to manage these challenges to maintain their hybrid nature. Each interview lasted for 30 to 45 min and was audio recorded with the permission of the participants to aid in data transcription and analysis. To ensure consistency, notes were also taken during interviews. The performance of each benefit corporation was analyzed focusing on multiple aspects such as growing/sustaining business through product/service offering/s to create both financial and social value, reputation in the field and partnerships with other firms/agencies. For example, The Precisionists, Inc. creates jobs for disabled veterans, individuals with a broad range of disabilities and aims to create over 10,000 careers by the year 2025 for individuals with disabilities. The Precisionists was awarded by the Autism Society of America for its efforts in 2018 and has developed partnerships with the renowned pharmaceutical company: Pfizer, the biggest energy company: Exelon, and one of the major financial services companies: UBS. Similarly, Rhino Foods has successfully grown from a small ice cream shop into a business with over 150 employees. The company is best known for their ice cream sandwich and manufactures cookie doughs, baked brownies, and cake pieces for most major brands in the ice cream industry and co-packs ice cream cookie sandwiches for national and international companies. Through the Rhino Cares program and employee exchange program, the company creates substantial benefits for the employees and the community. The performance of each benefit corporation is detailed in Table 1.

Table 1.

Interviewed benefit corporations and participants.

Benefit corporation	Benefit corporation /Certified since (year); state	Industry; Performance/Status	Interviewee	Staff, office/Store
1. The Precisionists, Inc	2016; Delaware	Talent management; awarded by the autism society of America for advancing employment opportunities for autistic adults and employment partner of Pfizer, Exelon, and UBS	1. Founder & CEO	5,1
2. Rainbird Village	2015; Utah	Regenerative municipality; employee-owned benefit corporation and leading-edge development institution	2. Co-founder	10,1
3. Native	2016; Vermont	Environmental service; worked with hundreds of firms to develop community and landscape-scale projects and awarded as “best for the world” in 2017	3. Director	22,1
4. RyeCatcher Education	2014; Delaware	Educational software; served more than 23,000 students	4. Founder& CEO 5. Director	12,1
5. Mulanje Tea Imports	2015; Massachusetts	Beverage; supplier of high-quality african tea & coffee products for some of the largest food and beverage companies in the world	6. Founder 7. Co-founder	4,1
6. Carbon Credit Capital LLC	2015; New York	Environmental service; authored the world’s first-ever carbon offset methodology for generating carbon credits from e-waste recycling and member of the green America business network	8. Founder, managing director 9. Sustainability expert	4,1
7. Accelerate Brain Cancer Cure	2021; Washington DC	Medical research on brain cancer; switched to a non-profit organization	10. Director	4,1
8. Still Waters Retreat Center	2017; Connecticut	Hospitality venue for retreats, meetings; closed on Dec 2020	11. Co-founder	NA
9. The CARES Group	2015; Connecticut	Community support services related to addiction and overdoses. Switched to a non-profit organization	12. Co-founder	5,1
10. Blue Earth Compost	2022; Connecticut	Waste management: Recycled millions of pounds of food and awarded as ‘best for the world’ in 2022	13. CEO	15,1
11. Drew’s Honeybee	2016; Connecticut	Skincare; dedicates 20% of profits to honeybee research and advocacy to the state government’s agricultural experiment station	14. Founder	4,1
12. Building Green, Inc	2019; Vermont	Consulting; provided service to thousands of design firms, over 200 architectural firms, government agencies and universities	15. Founder 16. CEO	14,1
13. Greenvest	2020; Vermont	Investment advising; provides the largest arrays of socially responsible investing services and product choices	17. Financial advisor 18. Investment advisor	6,2
14. Groennfell Meadery	2020; Vermont	Beverages; Vermont’s premier craft Meadery and the first carbon negative brew house in Vermont	19. Founder & CEO 20. Co-founder	3,1
15. The Scott Farm	2017; Vermont	Agriculture; grow over 130 varieties of heirloom apples and other fruits	21. General manager	14,1
16. Encore Renewable Energy	2016; Vermont	Energy; leading clean/solar energy company specializing in industrial, and community-scale solar systems. Powered over 30,000 homes; partnered with over 15 industry leaders for clean energy solutions	22. Vice president 23. Director	>30,1
17. Data.world, Inc	2016, Texas	Enterprise data service; leading enterprise data platform for some of the world’s most recognizable brands	24. General counsel	66,1
18. Lake Champlain Chocolates	2018; Vermont	Manufacturing; produce over one million pounds of gourmet chocolates each year	25. Supervisor	>50,3
19. Gibbs Smith	2014; Utah	Publisher; grew from small to a mid-sized company publishing about 60 new books per year	26. CEO	56,1
20. Immix Law Group, PC	2013; Oregon	Legal activities; industry leader specializing in corporate transaction, merger & acquisitions, IP protection	27. Principal attorney	21,2
21. Learnie	2020; Utah	Micro-learning; subscription platform for SAAS-based learning system and named among the top learning systems in the world	28. CEO	6,1
22. Net Raising	2013; Oregon	Web consultancy; business for over 18 years and partnered with diverse organizations	29. Founder	4,1
23. Onchenda Open Global Food Cooperative	2015; Utah	Food wholesaler; marketplace matchmaker platform for local food producers’ direct sales to consumers	30. Co-founder	2,1
24. Prorecycling Group	2017; Utah	Recycling; reached milestone of recycling 4 million pounds of food scraps for residential and commercial clients	31. President & general manager 32. Director	5,1
25. Suncatcher Energy	2015; Utah	Solar energy; provides residential & commercial solar systems for manufacturing companies, schools, government agencies, and homeowners	33. Founder	4,1
26. Home Care Associates of Philadelphia, Inc	2012; Philadelphia	Home health care; provided training and placed over 1800 people in quality jobs	34. Training coordinator	170,1
27. Rhino Foods	2013; Vermont	Food manufacturing; manufactures edible cookie doughs, brownie, ice cream sandwich and other frozen desserts. Top global supplier to the ice cream industry	35. Owner & president 36.Director	>150,1
28. Acron Sign Graphics	2013; Virginia	Architectural signage, graphics - Comprehensive sign services for clients worldwide	37. Vice president	40,1
29. King Arthur Baking	2007; Vermont	Food manufacturing; oldest flour and premier baking company. Leading industry supplier in flour, baking mixes, baked goods, and cookbooks	38. Supervisor	>300,1
30. CoMetrics	2013; Massachusetts	Financial service; served thousands of enterprises-retail stores, distributors, manufacturers using data to inform business decisions	39. CEO 40. Director	10,1

Data analysis

Interview transcripts were analysed using Nvivo software to facilitate data coding. Data was analyzed following a process of iteration, contextualized within an emerging structure of theoretical reasoning (Strauss and Corbin, 1998). In the first stage of coding, in vivo codes (i.e., terms and descriptions used by the interview informants) were utilized when feasible. Descriptive codes were used when in vivo codes were not available. Through iterations the first-order codes (see Figure 1) were tested to make sure their fit against the interview data. A number of first-order codes were acknowledged, namely, “Unique nature,” “Hiring approaches aligned with values,” “Organizational culture enabling socialization,” “Employee interaction with management,” “Role of boards,” “Hiring benefit director,” “Annual reports,” “Certification,” “Way of thinking,” “Higher costs,” “Lack of grants and donations,” “Creating positive social outcomes through growing business,” “Contributing in sustainable environment through growing business,” “Employee exchange program,” “Paid volunteering,” “Financial transparency,” “Employee ownership,” “Reward mechanisms,” “Varying laws,” “Lack of support from law makers,” “Advocating for standardizing legal terms,” “Enlightening people,” “Unknown notion,” “Counter intention from the Wall Street,” “Partnering with diverse entities,” and “Credibility.”

Figure 1.

Data structure.

In the next stage, axial coding was performed (Strauss and Corbin, 1998) to recognize the relations among the first-order codes and to consolidate the first-order codes into second-order themes. The first-order codes were compared with the core concepts and current state of the institutional logic and benefit organizations literature. Accordingly, the identified first-order codes were grouped in thirteen second-order themes around the competing institutional logic and benefit corporations’ dynamics. Finally, the second-order themes were grouped into three aggregate theoretical dimensions—“Managing Internal Dynamics,” “Integrating Competing Logics/Aligning Competing Goals,” and “Managing External Relations.” These aggregate theoretical dimensions advance the analysis to a higher level of abstraction (Grodal et al., 2021) and are related closely to the ongoing activities utilized by the benefit corporations that they also need to sustain over time to be successful.

Findings and analysis

We found that the benefit corporations experienced five specific types of challenges (second-order themes) and engaged in eight specific types of practices (second-order themes) that aggregate to the three theoretical dimensions: “Managing Internal Dynamics,” “Integrating Competing Logics/Aligning Competing Goals,” and “Managing External Relations”—the three sets of ongoing activities that benefit corporations need to sustain over time to be successful. Tables 2, 3, and 4 provide quotations from the data that illustrate each of these activities.

Table 2.

Data exemplars of first- and second-order constructs.

Aggregate theoretical dimension 1: Managing internal dynamics
Enabler: Managing organizational identity
Second-order themes	First-order codes	Representative quotations
Challenge: Structural Practice: Hiring and socialization Practice: Maintaining governance	-Unique nature	“…need to make sure company Board is well represented by having directors who will assist and support us to advance our social mission as well as business goals…this is truly a unique balancing act…” “...As a company we consider creating impact not only for our shareholders, but also for all the stakeholders including our employees, customers, and community….it is not easy as you need to manage financial and social objectives at the same time…”
	-Hiring approaches aligned with values -Organizational culture enabling socialization -Employee interaction with management -Role of boards -Hiring benefit director	“...review and improve our policies like inclusive hiring practices… to engage and support our people...that improves the culture” “…teaching the philosophy throughout the company, too. When recruiting, we use job seeker websites and referral hiring, but we do make sure that applicants understand concepts of employee ownership and benefit corporation. You can tell during the interviews who gets excited by that and to whom that’s meaningful for…” “You know as a benefit corporation, the philosophy of business fostering good is part of our DNA and our mission. While attracting talent we make sure to hire those having similar mindset…we don’t just look at the typical skills and experiences…” “Company culture has been strong. People enjoy working here as they think the work is doing good for the world…You need to hire the right people to get the mission, train them over time and this can work wonder as employees respond positively. At Gibbs Smith, employees can give feedback to the company and managers for improvement, too.” “… the secret sauce is the culture and the sense of having a broad range of stakeholders that include not only our customers but also our vendors, employees, our community and the way we put that together to inform what we do and how that makes a real difference for our success… then you get confidence in terms of how people view us and want to work with us…” “…have the culture of democratic decision-making...employees are able to provide their inputs on suggestions and raise any concerns to the president of the company… …” ‘…employees are kind of the owners as they are the stakeholders...they sit on board and are part of the decision-making process for the company…” - “We are fortunate to have a supporting board that cooperates with the initiatives wholeheartedly…” - “…to continually assessing objectives and how best to report on our social and environmental performance, while conforming to the governance requirements, we appointed a benefit director on the company’s board of directors, who plays a major role ensuring that we are fulfilling our social mission and duties.”
Enabler: Supporting mental shifts
Challenge: Administrative Practice: Changing perspective	-Annual reports -Certification - Way of thinking	“The administrative process is cumbersome… as a benefit corporation we need to generate annual reports describing the impacts created. Right now, the state mails them to us and if the mail is not delivered on time, we are considered late to submit. The State is trying to set up online interface [however]has not happened yet…” “There are strict administrative requirements. One of the requirements is to conduct an audit; certain transparency requirements that [we]need to pay for and use to hold us accountable to the public…” “One of the biggest challenges we faced is maintaining the certification going through the B Corp assessment tool…. it’s exhaustive and you must show that you addressed all points…” “...completing the process and surviving the re-certifications are quite challenging for any sized company-let alone small firms like us…” “The one thing that I would like to share that as a benefit organization, you need a mental shift to report the activities that we do as a company and the impact of the activities…” “Each year we have to prepare annual impact report … we actually appreciate because as a benefit entity it holds our feet to the fire and make us accountable. While delivering great service to clients, this adds to our ability to attract new talent to work for us” “The process is cumbersome…however, we know, with our suite of renewable energy solutions we are helping customers to save money, get energy efficient and fighting climate change…reporting all our efforts is the right thing to do and so we persevere in the process…it helps to get our name out there and more importantly, it helps with our sales…”

Table 3.

Data exemplars of first- and second-order constructs.

Aggregate theoretical dimension: Integrating competing logics/Aligning competing goals
Second-order themes	First-order codes	Representative quotations
Challenge: Financial Practice: Reinvesting profits Practice: Formal organizational processes Practice: Designing incentives	- Higher costs -Lack of grants and donations	“We incurred higher legal and administrative costs. We were required to have consistent pay checks for our employees. But could not guarantee enough income due to fluctuations in the funding sources...had a negative effect on fundraising “We were losing out on of grants and donations due to our status. As a benefit corporation, we failed to draw investors… because brain cancer isn’t too common, [we]were having difficulty tracking donors as the research is expensive and lengthy … made it difficult to sustain business” “We thought we would not have to rely on grants, fundraising and donations from the sponsoring companies… the reality is, we lost out on grants because of our incorporation as a benefit corporation. Moreover, as benefit corporation donations were not only difficult to get, but they could also not be made tax-deductible, as well. We lost some significant private contributions since donations are not tax deductible to benefit corporations…” “Grant-giving organizations have more sympathy for non-profits. Our applications for grants were rejected multiple times outright...as we are listed as a benefit corporation. Public image is much better for a non-profit company than for a benefit corporation...We find that individual donors and companies typically want to help the non-profit businesses more”
	- Creating positive social outcomes through growing business	“…benefit corporation status reflects what has always been in our DNA- the simultaneous pursuit of social good and financial viability.” “CoMetrics offers a technology platform that helps independent enterprises benchmark their performance. For me is rewarding when my client organizations identify business opportunities and can make informed decisions…we have been able to grow steadily and hire more people…” “...frankly, we do not make a lot of profit, but we reinvest a portion of it in social commitments to become environmentally and socially responsible…” “Our success is not measured by the profit we make, but how well we achieve our goals and the impact we make in the society” “Collaborating with the state’s agricultural experiment [research] hub, we reinvest more than 20% of our profits to support vital research in these areas” “...our goal was to make it easy to identify needs, track, and connect those children needs with service providers to get access to services...being a benefit corporation publicly signalled that we are not motivated just by the financial benefit of business…”
	-Contributing to sustainable environment through growing business - Employee exchange program - Paid volunteering -Financial transparency -Employee ownership -Reward mechanisms	“…came up with a subscription revenue model. Company is growing quickly…grew from having 20 clients to over 250 residential clients for our service… added a separate business wing for commercial clients… achieved the milestone of having 4 million pounds of food scraps from being incinerated to be recycled back into soil…signals strong stance for environment protection” “We offer innovative solutions that not only reduce carbon emission, but also provide considerable benefits to the local community in a sustainable way to fight climate change. We assess and measure the most carbon intensive spots in the entire value chain for our commercial clients...provide the goals, ways to mitigate and offset the emissions. It provides a framework for tangible accomplishment for greenhouse gas emissions…offer climate education…” “…get our name out there moving toward a business environment that does not only take care of own interests only but other impacts that can be provided by a company [such as] taking care of employees, community needs and creating sustainable impacts for the environment” “We are the first carbon negative brew house in Vermont. We use 100% renewable energy. Through our manufacturing process, raw materials go in a closed circle system, and it produces biogas. We put more solar energy back in grid… innovated a system which uses the metabolic activity of yeast to heat the building and water and thus, making the entire system closed circle. We are also water sustainable with almost zero water waste…maintain nine acres of wild pollination fields.” “… allow employees to participate in employee exchange program working with a partner company- Lake Champlain Chocolates, ranging from a few weeks to a few months where employees receive training to further develop skills while still receiving all Rhino foods pay benefits…can also take volunteer time off to work for any community work” “We have paid volunteer time for our staff throughout the company. Through this we aim to better understand the actual need of our community. We have a wonderful program that helps the homeless youth. We also look after our distributors as they represent a huge part of how we do business and we say, how do we support you? We stay in touch with them at personal level.” “…We have financial transparency policy and commitment to constant improvement in terms of the practices…this gives us the accountability as a company…” “… we are transparent about our finances, like, how much profit we are making, how much profit we are sharing, salary information and others…” “…we do practically open book management… we share all of the financial information like how we are doing in terms of profits and compensation in order to be transparent…” “…the company is 50% owned by the employees. The first employee that we hired 45 years ago is still with us. We tend to have long tenured employees because we have the philosophy of engaging employees as partners in the company.” “In our organization each employee is an owner… employees run the company through a rotating, term-limited board of directors…” “…seasonal staff layoff does not go with Rhino Foods culture… to serve the dual purpose of avoiding season staff layoff and retaining well-trained staff for the long-term… we have found this program has increased our employee morale… developed partnership with local credit union and it allows employees to receive loan…We have Rhino Cares program that is focused on driving and engaging our employees in the community… as part of reinvesting in our employees, we share 10% of our pre-tax profit through various bonus programs” “…we developed employee handbook that clearly outlines the rights of an employee, the norms, and the codes of the company. In doing so we detailed our benefits to our employee and expanded the benefit program by including flexible work hours and generous health, retirement benefits” “I like everything about Home Care Associates(HCA) since 1993. I have watched HCA growing from three to over hundred employees. Our employees are secure in their job and receive generous retirement plan benefits…HCA is not like a typical corporation where employees just receive pay checks…what we offer here is to help them to maintain their employment…” “…makes a difference in terms of retaining talent. So, even though we might not pay salary like a larger company, we can offset that by the value of the benefit structure and the people feel like that they are part of something…has been helpful for us to sustain and hire more people” “As a benefit corporation, it has resonated well with our employee retention...it distinguishes us from other companies; people like working with companies that have a soul…[it] shows dedication and legal obligation to following the code of conduct. It has also helped on the community side-especially, the enterprise customers who are soul searching at the corporate level…”

Table 4.

Data exemplars of first- and second-order constructs.

Aggregate theoretical dimension 3: Managing external relations
Enabler: Raising public awareness
Second-order themes	First-order codes	Representative quotations
Challenge: Legal standardization Practice: Advocating and educating	-Varying laws -Lack of support from law makers	“It was cost-effective and easier for us to incorporate as a benefit corporation in Delaware. It became a problem in New York. Every state has different definitions of benefit corporations, and our company is not being recognized in the state of New York. We have applied for three times, but New York just keeps rejecting us…” “We realized after becoming a benefit corporation that it’s not fully tested in the court of law across different states here. It is hard to understand if you are not familiar with it. People often get confused…” “Laws vary widely ...there is also pushback from legislators in the government regarding benefit corporations. There are those who are more conservative and see this as creeping socialism-others view it as an interesting option. For example, Michigan was one of the biggest resistances—one influential voice in the Michigan Chamber of Commerce (CoC) thought benefit corporation was a bad idea as it would mean he would have to change how he did business…”
	Advocating for standardizing legal terms -Enlightening people	“… we deem advocating for legislation important as it helps benefit corporations like us to be protected from hostile takeovers and provide flexibility to the entrepreneurs to weigh stakeholder interests in all business decisions…” “…we have been engaged in the process of enlightening people and advocating nationally to endorse legislation and standardize legal terms that can yield multiple benefits. Not only it can help benefit corporations to protect their values and grow their business sustainably, but it can greatly help the states to reduce the regulatory burdens as benefit corporations are required to publicly disclose their business practices, as well as how they are doing to create social and environmental impacts”
Enabler: Forming partnerships and alliances
Challenge: Non-traditional concept and incumbent resistance	-Unknown notion - Counter intention from the wall street	“...there are a lot of people who don’t get it...It’s not as well-known entity as LLC [limited liability company] or C Corporation. As benefit corporations are inherently for-profit with social obligations, it mixes a legal entity concept with other things. Most people are just looking at the product or services- they don’t see the administration or organization behind an organization. There’s also a lot of cynicism around benefit Corporation regarding what percentage of the money goes to the good…” “There are problems relating to standardized language around benefit corporations in different states in the United States… [as a result] the concept is confusing to many...we have to explain a lot…” “Nobody knows what exactly a benefit corporation is...from state level, have not seen a decent level of promotional initiatives on benefit corporations to get the message out beyond…” “One of the biggest challenges we faced after becoming a benefit corporation is getting the word out that benefit corporations exist…” “We have experienced a counter intention from the Wall Street (that) does not want to promote benefit corporations. Wall Street wants a promising start-up and a quick exit, whereas benefit corporations aren’t nearly likely to go…”
Practice: Developing collaborations	-Partnering with diverse entities -Credibility	“…we have exclusively partnered with projects that not only reduce carbon emission but also provide considerable benefits to the local community in a sustainable way. That often means providing various services and products for companies and household customers to lower carbon emissions from their daily activities. In this process, we learned of similar other companies in the benefit corporation community who engaged with us understanding that it takes a village to solve environmental problems” “… enabled us to link with international and local partners- for example, public institutions, private and government entities, large businesses, SMEs to achieve long-term goals related with high-quality carbon emission reduction projects. We have achieved business growth through partnerships and innovative initiatives” “Being a benefit corporation made easy for us to form partnerships with the state’s main agricultural programs to support research…” “…when I explain the business of my company to peers as a benefit corporation, it gives us credibility...it shows our company walks the talk” “…it has helped us to gain the reputation of being trusted as a leader in this field and helped us to grow our professional peer networks with other similar companies”

Aggregate dimension 1: Managing internal dynamics

The first aggregate theoretical dimension, “Managing Internal Dynamics” (Table 2) is enabled by “Managing Organizational Identity”; and “Supporting Mental Shifts.”

Managing organizational identity

The first enabler ‘ Managing Organizational Identity’ aggregates the three second-order order themes—“Challenge: Structural,” “Practice: Hiring and Socialization,” and “Practice: Maintaining Governance.” Out of these, the second-order order theme “Challenge: Structural” aggregates the first-order code “Unique nature”; “Practice: Hiring and Socialization’ aggregates the three first-order codes “Hiring approaches aligned with values,” “Organizational culture enabling socialization,” and “Employee interaction with management.” Finally, “Practice: Maintaining Governance” aggregates the two first-order codes “Role of boards” and “Hiring benefit director.”

In benefit corporations, organizational structure affects the tension between social and commercial objectives. Aspects of benefit organizations that can create tensions include how the organization’s social mission and commercial business activities are integrated and prioritized and performed by the same organizational members (Battilana and Lee, 2014). Research on hybrid identity has found that holding several identities at once can lead to conflict and may prove untenable (Cornelissen et al., 2021). Since a benefit organization integrates contradictory institutional logics within its core, as revealed by this study, it experiences challenges associated with establishing a shared sense of identity among its organizational members (Battilana and Dorado, 2010). When organizational members have identities that align disproportionately with the conflicting institutional logics (social or commercial business values), benefit organizations experience the risk of goal displacement (Battilana et al., 2017; Battilana and Lee, 2014). Therefore, agreeing on a collectively shared organizational identity helps these organizations achieve the dual mission of creating societal influence in economically viable ways (Cornelissen et al., 2021).

This study (Table 2) has demonstrated that benefit organizations manage these structural challenges by creating a collective organizational identity, enabled by hiring approaches and socialization practices to instill values and emphasize desired behaviors and an appropriate governance system for managing joint accountability of competing logics. The study demonstrates that for hiring approaches, in addition to traditional interviews, the search for employees with experience and skills that collectively represent the necessary social, community-based mission and commercial business orientation of an organization are crucial (Smith et al., 2013). In addition, an organizational culture that shapes how members make sense of the organization and themselves through their embedded day-to-day activities also plays an important role in benefit corporations (Battilana and Dorado, 2010; Lee and Battilana, 2020). This is evident from the business practices of multiple benefit corporations, such as Home Care Associates (HCA) of Philadelphia, Groennfell Meadery, Gibbs Smith, and Data world, which have prioritized employee hiring and retention practices. These organizations maximized impact creation for their employees. Thus, the findings of this study are aligned with those of Battilana and Dorado (2010), who affirm that benefit corporation identities attract like-minded employees who hold doing greater good for the community as a central personal philosophy.

Benefit organizations that combine a social mission and business objectives at their core also face unique governance challenges related to managing joint accountability. Governance mechanisms play an important role in ensuring that benefit organizations uphold this dual accountability and resist pressures to drift toward either their social objectives or their business objectives (Baldo, 2019; Nigri et al., 2020). In this regard, benefit organizations’ boards play a substantial role, and active engagement from the board helps ensure that these organizations can retain joint accountability to sustain their hybridity. This study reveals the role of governance mechanisms enabled by the role of unique employee ownership. Having dedicated benefit directors on the board helps to promote space for negotiation, allowing employees to interact with the top management. The findings of this study are thus aligned with existing research recommending that creating and maintaining appropriate governance mechanisms enables benefit corporations to integrate economic and social imperatives (Besharov and Smith, 2014; Stubbs, 2019) and the related trade-offs. This ensures that balancing the contradictory institutional logics accomplishes high levels of social and commercial business performance.

Supporting mental shifts

A further practice that enables benefit organizations to manage the competing institutional logics is the certification process, which requires an impact assessment. Certification is a way to codify benefit corporation practices to signal to internal and external stakeholders (Nigri et al., 2020; Nigri and Baldo, 2018; Santos et al., 2015). The data (Table 2) reveals that the second enabler “Supporting Mental Shifts” aggregates two second-order themes- “Challenge: Administrative” and “Practice: Changing Perspective.” The study found that: “Challenge: Administrative” aggregates two first-order order codes “Annual reports” and “Certification,” and “Practice: Changing Perspective” aggregates the first-order order code “Way of thinking.”

Through changing their perspectives (Table 2), benefit corporations engage in the impact reporting/certification process to benchmark their performance against peers to further improve their operations, creating positive effects on their missions. The study further shows that certification enables benefit organizations to attract like-minded employees and helps to promote sales. Thus, supporting the literature, the study findings recommend that managing the certification process improves the reliability of the benefit corporations’ economic and societal imperatives to balance the demand associated with integrated competing institutional logics.

Aggregate dimension 2: Integrating competing logics/Aligning competing goals

The second aggregate dimension, “Integrating Competing Logics/Aligning Competing Goals,” aggregates the four second-order order themes—“Challenge: Financial,” “Practice: Reinvesting Profits,” “Practice: Formal Organizational Processes,” and “Practice: Designing Incentives.” It is found that “Challenge: Financial” aggregates the two first-order codes “Higher costs” and “Lack of grants and donations”; “Practice: Reinvesting Profits” aggregates the two first-order codes “Creating positive social outcomes through growing business” and “Contributing in sustainable environment through growing business”; “Practice: Formal Organizational Processes” aggregates the three first-order codes “Employee exchange program,” “Paid volunteering,” and “Financial transparency.” Finally, “Practice: Designing Incentives” aggregates the two first-order codes “Employee ownership” and “Reward mechanisms” (Table 3).

Research suggests that regulatory regimes lead to difficult trade-offs for benefit organizations that promote the joint accountability of creating social and commercial business values (Haigh et al., 2015; Kennedy et al., 2020). The hybrid nature of benefit organizations imposes a higher burden of accountability costs (McDonnell, 2014). It complicates the attainment of tangible external financial resources, such as donations and grants, because of the donors’ knowledge that these organizations experience continuous pressures in creating conflicting joint social and business values, which is also evident from the study findings. As a result, donors often perceive investment as risky owing to the uncertainty that, in the future, the benefit organization might take a strategic direction that concentrates on its social values over business values (Cooney et al., 2014).

In response to this challenge, most of the studied benefit organizations integrated their revenue-generating transactions where profits enabled the pursuit of societal outcomes with both social and financial value. By avoiding over-dependency on external grants/donations, organizations such as Rhino Foods, RyeCatcher Education, Learnie, The Scott Farm, and Drew’s Honeybees aimed to make enough profits through their commercial activities to sustain their businesses. These organizations then reinvested profits in new products/services to pursue their social and environmental mission. For example, Drew’s Honeybees, The Scott Farm, and Rhino Foods reinvest their profits in agricultural research and various societal commitments through community engagement. Moreover, organizations such as Co-Metrics, Groennfell Meadery, Pro-recycling Group, Carbon Credit Capital, Encore Renewable Energy, Native, Suncatcher Energy, and Blue Earth Compost reinforced their mission of creating a more sustainable environment by reducing their adverse ecological effects, such as carbon emissions, climate change, waste reduction, recycling, and the use of chemical pesticides. Thus, the findings of this study lend support to the existing research that by aligning the generation of profit with a purpose (Stubbs, 2019), benefit organizations can generate better financial value by internalizing social and environmental considerations throughout their product/service offerings and decision-making (Czinkota et al., 2020; Mion, 2020; Mion et al., 2021).

Additionally, establishing formal organizational processes (Table 3), including financial transparency, and allocating time or profits to a pro bono work mission (need-based social logic and demand-based market logic), was helpful. For example, ensuring financial transparency efforts, engaging in an employee exchange program, and dedicating substantial volunteer employees’ time to contribute to the community played an important role. Thus, pursuing a dual strategy of generating positive societal influences while contributing profits to societal activities enables organizations to manage their competing logics, in line with the suggestions found in the literature (Reynolds and Holt, 2021; Santos et al., 2015).

Moreover, incentives and control systems reinforce values, influence the behaviors preferred by organization members, and how these behaviors or outcomes are to be rewarded. Research suggests that hybrids, such as benefit corporations, can encourage appropriate member behaviors by establishing a shared understanding of the significance of achieving the social mission and commercial objectives and the appropriate reward mechanism. Such systems eventually play a significant role in communicating the organization’s guiding values (Battilana et al., 2017). The data shows that in benefit organizations like Gibbs Smith and King Arthur Baking, incentive systems, such as sharing profit with employees and employee ownership in the organization, contribute to manage the challenges of competing logic. Incentive systems that measure performance on both the social objective and commercial business dimensions are thereby important factors in the organizational structure of benefit organizations. Through this system, the incentives for organizational members to pursue multiple institutional logics can be aligned.

Aggregate dimension 3: Managing external relations

The third aggregate dimension, “Managing External Relations” (Table 4) is enabled by “Raising Public Awareness” and “Forming Partnerships and Alliances.”

Raising public awareness

Benefit organizations are often perceived as threatening the dominance of incumbent organizations that endorse institutionalized forms. It has been argued that benefit organizations’ activities threaten to corrupt the existing market discipline and thus destabilize market growth (Diez-Busto et al., 2021; Galli et al., 2021). Consequently, benefit organizations may experience challenges, such as strategic retaliation by incumbent organizations opposed to the development of favorable legislation that would otherwise provide rewards and legitimacy. Supporting the literature, RyeCatcher Education, for example, mentioned that varying legal implications (Hiller, 2013) across different states of the United States posed a considerable challenge for the benefit organization to manage its operations. To manage this challenge, the study illustrates how benefit corporations are engaged in institutional work through advocacy to standardize legal terms, promote benefit corporations’ values, and educate people on the creation of societal impacts to increase recognition, thus endorsing the recommendations found in the literature (Stubbs, 2017, 2019).

Moreover, benefit corporations experience challenges due to the prevailing institutionalized forms in the conferral of legitimacy. In general, legitimacy is awarded to organizations that comply with the predominant institutionalized expectations (Kraatz and Block, 2008). Since benefit organizations promote contradictory institutional logics of creating social as well as commercial business values, these organizations face the challenge of not only gaining the attention and approval of external evaluators, but also in experiencing the challenge of instituting their legitimacy for operational effectiveness (Battilana et al., 2017).

Forming partnerships and alliances

The data indicates that the second enabler (Table 4) “Forming Partnerships and Alliances” aggregates the two second-order themes “Challenge: Non-traditional Concept and Incumbent Resistance” and “Practice: ‘Developing Collaborations’.” The second-order theme “Challenge: Non-traditional Concept and Incumbent Resistance” aggregates two first-order order codes “Unknown notion,” “Counter intention from the Wall Street,” and “Practice: ‘Developing Collaborations’” aggregates two first-order order codes “Partnering with diverse entities” and “Credibility.” As demonstrated in the study, the competence of benefit organizations like Co-Metrics, Carbon Credit Capital, Suncatcher Energy, Building Green, and Drew’s Honeybees in developing collaborative partnerships within the broader community of like-minded businesses was identified as a crucial component. It is evident that forging relationships with similar organizations can not only provide support services but also helps to create societal impact and the opportunity to gain the legitimacy to maintain a hybrid nature (Lawrence et al., 2009; Tracey and Philips, 2011).

Discussion and conclusion

Drawing on institutional logics that establish “the rules of the game” (Besharov and Smith, 2014; Thornton et al., 2012) and specifically where benefit corporations are required to embed competing logics within their core features, this study demonstrates how benefit corporations can manage challenges to align competing logics. From the results of interviews with 40 representatives from 30 benefit corporations, this study reveals that benefit corporations face five specific challenges and engage in three sets of activities with associated practices to manage these challenges successfully over time to maintain a hybrid nature.

It is argued that in the absence of institutional scripts that provide methods to manage the challenges between competing logics, benefit corporations need to integrate competing logics and this needs to be supported by actively managing two additional dimensions in the organization’s internal dynamics and external relations to be successful. First, benefit corporations need to manage a collective organizational identity by maximizing impact creation for employees (need-based social logic) through appropriate hiring and retention approaches and socialization practices. For example, during the interview process, they should screen employees to identify whether their philosophy and skills align with the corporation’s values. Second, they need to establish a governance system in which the board has a significant role and there are dedicated benefit directors on the board to manage the dual accountability (need-based social logic and demand-based market logic). Third, through mental shifts, benefit organizations should aim to increase their formal recognition and reliability through impact reporting and/or certification (Nigri and Baldo, 2018; Santos et al., 2015). These steps would allow such corporations to amalgamate the demands of competing logics and manage their accountability for meeting economic as well as societal demands (Baldo, 2019; Battilana and Dorado, 2010; Besharov and Smith, 2014; Nigri et al., 2020). Consequently, these actions to create a collective organizational identity and change mental shifts will assist benefit corporations to integrate their revenue-generating transactions (demand-based market logic) with a purpose (need-based social logic) through growing their business and reinvesting profits; incentive systems, such as sharing profits with employees and employee ownership in the organization; formal organizational processes, such as financial transparency; employee exchange programs and dedicating profits/time for pro bono work for generating both social and financial value (both institutional logics) (Reynolds and Holt, 2021; Stubbs, 2019). Generating a higher level of social and commercial performance (both institutional logics), would assist benefit corporations to engage in external relations for institutional work through advocacy and education to increase recognition and forge collaborative partnerships (Battilana et al., 2017; Stubbs, 2017, 2019) with other businesses in the broader external community to gain institutional legitimacy. Such integrated activities will promote the appearance of compliance to multiple audiences and, thereby, benefit corporations will be more likely to be acknowledged as legitimate members.

The study’s findings suggest that three benefit organizations, namely, The CARES Group, Still Waters Retreat Center, and Accelerate Brain Cancer Cure, were unsuccessful in integrating both logics and maintaining their hybrid nature as a benefit organization. Owing to financial challenges, Still Waters Retreat Center closed down, whereas The CARES Group and Accelerate Brain Cancer Cure switched to being non-profit organizations. The CARES Group, for example, provides support and education for individuals and families that suffer from addiction and substance abuse. However, it was completely reliant on donors for financing. Similarly, Accelerate Brain Cancer Cure, whose mission is to close the current gap to expedite brain cancer research and discover new treatments to cure brain tumors, solely relied on donors. The analysis, therefore, reveals that instead of integrating mission and revenue-generating activities in their strategies (Battilana and Lee, 2014; Santos et al., 2015) to grow business through product/solution design for generating both financial and social value, these organizations perceived creating profit and positive societal effects as mutually exclusive. Thereby, the crux of this study is that integrated practices circumvent possible paradoxes in the allocation of resources and assist benefit organizations in averting the mission drift that otherwise might arise from tensions between achieving commercial objectives and attaining social goals and thus to manage their competing institutional logics.

The study makes several contributions to the existing literature. First, this empirical study identifies multiple challenges associated with contesting institutional logics. Second, this study identifies that benefit corporations should integrate/align these competing logics by actively managing both their internal dynamics and their external relations in order to be successful. More specifically, in highlighting the interplay of both logics, this study provides empirical insights into the three sets of ongoing activities with related practices that benefit corporations need to sustain over time to be successful (Diez-Busto et al., 2021). The findings of this study thus broaden the existing research on benefit corporations as there is a lack of comprehensive and in-depth studies underpinning the practices used by benefit corporations for managing the challenges associated with competing institutional logics (Stubbs 2017). Third, in doing so, the article compares the approaches of benefit corporations that failed to combine both logics to sustain a hybrid nature, and thus offers significant lessons for prospective benefit corporations in managing the demands of opposing institutional logics more successfully. Overall, these results provide guidance to managers of prospective businesses to help them to understand and embrace these challenges and recommend that adopting integrated practices can help organizations to align profit and create societal impact. Hence, the findings of the study expand the existing research and respond to the call for more empirical insights in this emerging research area (Stubbs, 2019).

The study is qualitative, and apart from usual limitations that apply to any qualitative research, the limitations present important avenues for future research. First, the data for this study was collected from 30 benefit organizations in the United States. Future research should generalize these findings in other country contexts. Second, in learning from the challenges identified in this study, it may also be helpful to conduct further case studies on benefit corporations from an array of other varying sized benefit corporations, including small and large, as well as public listed and private organizations, to explore whether large and public listed organization experience other unique challenges. Finally, future research could test the findings of this study on a wider sample size, gathering quantitative data to further improve our understanding of how benefit organizations navigate challenges.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

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