Taking Trade-offs Seriously: Examining the Contextually Contingent Relationship Between Social Outreach Intensity and Financial Sustainability in Global Microfinance

Abstract

A key insight from research on hybrid organizing is that the joint pursuit of competing goals exposes an enterprise to potentially problematic tensions and trade-offs. Yet while studies have examined the former, the actual trade-offs that these organizations face—and how these might vary among enterprises and contexts—has been largely overlooked. Focusing on social enterprise, we address these gaps by (1) developing a framework that can be used to predict the compatibility of social outreach and financial sustainability for different types of enterprises and (2) arguing that the acuteness of trade-offs will vary based on the cultural roots of the issue an enterprise addresses, the market conditions where it operates, and the quality of its management. We test our arguments by studying 2,037 microfinance organizations in 115 nations between 1995 and 2013. Results support our predictions. Social–financial trade-offs are amplified when a social issue is intertwined with deep-seated cultural problems, such as discrimination, and when an enterprise operates in a weak institutional environment. Intensive social outreach becomes sustainable, however, when cultural barriers to outreach are low, market-supporting institutions are strong, and an enterprise is professionally managed. Our study thus shows that social–financial trade-offs are contingent and that the promise of sustainable social outreach varies widely across contexts. The e-companion is available at https://doi.org/10.1287/orsc.2017.1188 .

A Framework for Exploring the Degree of Hybridity in Entrepreneurship

“…Indeed, scholars seek to identify both the nature of social outcomes and indicators of high performance within those outcomes. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Possible social outcomes include, for example, subjective satisfaction (Kroeger & Weber, 2014); societal progress (Gundry et al, 2011); enhanced human experience (Zahra & Wright, 2016); the preservation of cultural and natural environments (Peredo & Chrisman, 2006); the alleviation of suffering after disasters (Dutta, 2017;Williams & Shepherd, 2016b; reduced poverty (Peredo & Chrisman, 2006); crowdfunding success (Parhankangas & Renko, 2017;Josefy et al, 2016;Calic & Mossakowski, 2016); food, water, shelter, and education (Certo & Miller, 2008); microloan organizations' performance (Wry & Zhao, 2018;Zhao & Lounsbury, 2016); "faith, hope, comfort and salvation" (Pearce et al, 2010); the empowerment of women (Datta & Gailey, 2012;; and both poverty reduction and conflict resolution in Rwanda's entrepreneurial coffee sector (Tobias et al, 2013). In contrast to these specific descriptions of social outcomes, other studies (typically c...…”

“…Collectively, these three approaches have advanced our understanding of (1) how rival institutional logics are infused into hybrid organizing and thus lead to potential tensions and conflicts among internal and external constituencies (Battilana & Dorado, 2010;Pache & Santos, 2013); (2) how the nature and strengths of challenges, internal/contextual tensions, and conflicts variably manifest at the organizational level (Cobb, Wry, & Zhao, 2016;Williams et al, 2017;Wry & Zhao, 2018; and how hybrid organizations succeed or struggle in using various means to manage such conflicts and assuage tensions (Battilana et al, 2015;Smith & Tracey, 2016); and (3) how different identity elements are integrated in the creation and strategic orientation of hybrid organizations (Besherov, 2014;Smith & Besherov, 2018;Wry & York, 2017) Notwithstanding their unique focus and insights, these past studies share a common premise: they tend to view hybrid organizations as a distinct organizational type that differs from traditional organizational forms in that hybrid organizations mix "two or more organizational elements that would not conventionally go together" (Battilana, et al, 2017: 129). While acknowledging such qualitative differences between hybrids and non-hybrids is useful, doing so risks overly simplifying the potential heterogeneity among the hybrids, thus underplaying the impact of different degrees of hybridity across organizations.…”

Cracking the organizational challenge of pursuing joint social and financial goals: Social enterprise as a laboratory to understand hybrid organizing

“…All the challenges discussed above are likely to vary across contexts. A recent empirical study of microfinance organizations in more than 100 countries, for example, shows how social-financial trade-offs varied according to the cultural context (Wry & Zhao, 2018). In addition, the strength of these trade-offs is likely to change over time.…”

The Impact of Social Outreach on the Financial Performance of Microfinance Providers in Pakistan

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