Hybrid Organizations:

ORIGINS, STRATEGIES, IMPACTS,

AND IMPLICATIONS

Nardia Haigh
John Walker
Sophie Bacq
Jill Kickul

This introduction to the special issue on hybrid organizations defines hybrids, places them in their historical
context, and introduces the articles that examine the strategies hybrids undertake to scale and grow, the
impacts for which they strive, and the reception to them by mainstream firms. It aggregates insights from
the articles in this special issue in order to examine what hybrid organizations mean for firms and practicing
managers as they continue to grow in number and assume a variety of missions in developing and devel-
oped countries. (Keywords: Hybrid Organizations, Social Enterprise, Business and Society)

W
ith the market for socially and environmentally conscious
products and services growing to $290 billion1 and the market
for socially responsible investments growing to $3 trillion in
assets in the U.S. alone (or 12% of professionally managed
2
funds), there has naturally been a complementary growth in the popularity of
organizations that seek to meet this market opportunity3 that we call “hybrid
organizations.” In our special issue, we define hybrid organizations as those
enterprises that design their business models based on the alleviation of a partic-
ular social or environmental issue. Hybrids generate income and attract capital in
ways that may be consistent with for-profit models, nonprofit models, or both.
Authors contributing work to this special issue refer to hybrid organizations (or
hybrids) by a variety of terms including “social hybrid venture,” “benefit corpora-
tion,” and “hybrid firm,” but central to the use of all terms is the duality of social
impact alongside financial sustainability. The term “hybrid organization” reflects
the propensity of such enterprises to blend traditionally for-profit practices with
traditionally nonprofit practices. Because they can exist as for-profits, nonprofits,

We would like to express our sincere gratitude to David Vogel, Kora Cypress, and other CMR personnel
for their guidance and support throughout the development of this special issue. Thank you.

CALIFORNIA MANAGEMENT REVIEW VOL. 57, NO. 3 SPRING 2015 CMR.BERKELEY.EDU 5

 Hybrid Organizations: Origins, Strategies, Impacts, and Implications

or both, an increasing number of hybrids comple-

Nardia Haigh is an Assistant Professor
of Management in the College
ment a nonprofit with a for-profit entity.4
of Management at the University of As one of the first comprehensive collabo-
Massachusetts Boston.
rations focusing on hybrid organizations, this spe-
<[email protected]>
cial issue collates research examining their
John Walker is the Director of Finance
and Business Development at A-List emergence, their business models and strategies,
Education, and an Adjunct Associate the ways in which they create and track impact,
Professor at Columbia Business School. and their implications for the broader markets in
<[email protected]>
which they operate. We review each of these
Sophie Bacq is an Assistant Professor of
Entrepreneurship & Innovation in the topics below, and conclude with broad manage-
D’Amore-McKim School of Business at rial takeaways. By covering these topics, we are
Northeastern University. <[email protected]> able to capture and share insights about what
Jill Kickul is the Director of the Social hybrid organizations can mean for traditional
Entrepreneurship Program in the New
York University Stern School of Business.
firms as they become potential partners, compet-
<[email protected]> itors, and acquisition targets.

Origins
In her book The New Pioneers, Ellis traced the nascent beginnings of entre-
preneurship with a social conscious to the 1960s and 1970s and the rise in political
consciousness.5 This was then complemented by a rise in the number of nonprofit
organizations established to address issues relating to environmental degradation,
human rights, women’s liberation, and to support anti-war efforts. Another phe-
nomenon underpinning the emergence of hybrid organizations includes traditional
nonprofits turning to earned revenue in the face of rising costs and growing compe-
tition for grants and philanthropic funding.6 Further to this, there has been a rise in
societal dissatisfaction with the inability of governments and firms to address long-
standing issues such as inequality, teen pregnancy, homelessness, substance abuse,
and others, alongside technological and economic trends that haven given citizens
the ability and confidence to do something about them.7
The growing number of hybrid organizations has accompanied legislative
innovations such as new business registration categories that protect executives
from shareholder action demanding companies maximize profit and prioritize it
over a social mission. In the U.S., for example, hybrid organizations can now
choose to register as a Benefit Corporation, a Benefit LLC, a Flexible Purpose Cor-
poration, or a Low-Profit Limited Liability Company (L3C). The certification body
B Lab is a key protagonist in this movement, as is The American Sustainable Busi-
ness Council. Since 2008, B Lab has certified 1,212 “B Corporations,” operating
throughout 121 industries in 38 countries.8
The importance of legal and taxation structures cannot be underestimated
in fulfilling hybrid organizations’ objectives, including both established models of
incorporation, partnership, and tax-exempt status together with emerging models
of benefit corporations and extended partnership law that integrate the achieve-
ment of both the social mission and shareholder value. In their article “Benefit
Corporation Legislation and the Emergence of a Social Hybrid Category,”
Rawhouser, Cummings, and Crane investigate the support for and opposition to

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 Hybrid Organizations: Origins, Strategies, Impacts, and Implications

Benefit Corporation legislation in the U.S.9 They found that states characterized
by a Democrat majority that passes more bills, a market with firms thriving on
sustainability-oriented products, and low nonprofit activity are more likely to
enact Benefit Corporation legislation. More significantly, the authors indicate that
anyone in favor of, or opposed to, Benefit Corporation legislation can influence
the likelihood of a State’s enactment of it, because less than ten people or organ-
izations typically contributed to pre-vote testimony.

Strategies
In common with other social entrepreneurs, hybrid entrepreneurs primar-
ily seek to initiate change to alleviate or compensate for a particular social or envi-
ronmental problem. In recognizing the power of market-oriented models to effect
such change in a sustainable manner, hybrids target interventions that exhibit
growth potential and profitability insomuch as they are ultimately self-funding.
Previous research has sought to answer questions surrounding what makes or
drives a social entrepreneur,10 and in this special issue we are concerned with
the tactics and strategies such entrepreneurs and their organizations employ to
pursue their goals. In particular, this special issue examines the ways in which
hybrid organizations create the shared value to which they aspire while remaining
economically viable.
The ability to create a mission-driven business that is financially viable is
vitally important, since there are examples where hybrids have folded or drifted
away from their mission either through acquisition, leadership changes, or fierce
competition from traditional businesses that maximize profits.11 Santos, Pache,
and Birkholz look into these kinds of issues in their article “Making Hybrids Work:
Aligning Business Models and Organizational Design for Social Enterprises.”12
Specifically, they develop a typology of hybrids based on whether social value cre-
ation is automatic or contingent on other support or interventions and whether
beneficiaries are clients or not. The authors offer advice for the management of
each hybrid type so that social entrepreneurs can align financial viability goals
with social impact goals and identify the kinds of challenges they may encounter
as they adjust their business models for such alignment.
One particular issue faced by social entrepreneurs striving to align financial
viability goals and social impact goals is deciding which legal structure will best
assist them to do both. In their article “Hybrid Organizations as Shape-Shifters:
Altering Legal Structure for Strategic Gain,”13 Haigh, Dowin Kennedy, and
Walker investigated 48 hybrid organizations and found that half of them changed
their legal structure. Their study examines why social entrepreneurs initially
choose for-profit over nonprofit or vice versa, explains why half of them changed
their initial structure, and shows the implications that such changes can have for
companies partnering with hybrids.
Hybrid organizations’ business models are often built to serve markets that
are traditionally underserved by mainstream firms and by governments, both of
which tend to cater to majorities. One such market is the labor market composed
of people with disabilities. Disabled people face significantly higher hurdles to

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 Hybrid Organizations: Origins, Strategies, Impacts, and Implications

gaining and sustaining employment than able-bodied people do because they are
perceived to have fewer skills. In his article “How Hybrid Organizations Turn
Antagonistic Assets Into Complementarities,”14 Hockerts defines antagonistic
assets as assets “that a priori make the commercialization or marketing of a prod-
uct or service more difficult,” typically leading firms to avoid them where possible.
The type of avoidance of so-called “antagonistic assets” Hockerts investigates is the
bias of traditional labor markets towards able-bodied people. Rather than avoid
them, hybrid organizations often embrace antagonistic assets by identifying and
developing “hidden complementarities” between organizational goals and skill
sets, and by creating demand for them.

Impacts and Implications

A further aim of this special issue is to offer content focused on the impacts and
implications of hybrid organizations. Social enterprises have been celebrated for their
aim to create positive social impacts,15 and it has been argued that the best social
enterprises will deliver a better social return on investment than the best for-profit,
public, or charitable organizations.16 Others have argued that social enterprises may
also create unintended negative impacts,17 and they speak to the challenges hybrids
have faced when measuring their outcomes18 and determining whether measured
outcomes represent failure or success.19 The article from Holt and Littlewood called
“Identifying, Mapping and Monitoring the Impact of Hybrid Firms”20 examines
both positive and negative impacts of hybrid organizations based on their study of
20 hybrids in Sub-Saharan Africa, develops a process that managers can use to iden-
tify and track impact indicators, and illustrates how to use it in practice.
Following Holt and Littlewood is an article by Lee and Jay21 investigating the
implications of hybrids for mainstream companies operating in the same industry.
Although they often operate in under-served niche markets, some hybrids compete
in mainstream markets, which makes them of interest to traditional firms as targets
for collaboration, competition, and/or acquisition.22 To date, only anecdotal evidence
has been presented about how hybrids influence mainstream firms, and some
researchers have questioned the degree to which operating a for-profit business with
embedded consciousness could ever be widely applied or achieve the sustained soci-
etal and environmental transformation for which they strive.23 Lee and Jay’s article
“Strategic Responses to Hybrid Social Ventures”24 addresses the issue of how estab-
lished mainstream companies respond to the entry of hybrid organizations into their
markets. The authors investigate the ways in which eight mainstream companies
have responded to the entry of a hybrid into their markets, and they develop a
framework that can guide others in the same situation.

Managerial Take-Aways from the Special Issue on Hybrid

Organizations
The articles in the special issue offer a wealth of insights and advice for
those building and managing hybrid organizations, for those managing traditional
firms that collaborate or compete with hybrid organizations, for those managers

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 Hybrid Organizations: Origins, Strategies, Impacts, and Implications

seeking deeper engagement with social or environmental issues, and for those
doing research on hybrid organizations.

You Can Influence the Hybrid Organization Trend

The current growth in hybrid organization numbers is reinforced by the
passage of supportive legislation, which gives advocates (and opponents) of
hybrids an avenue to influence both the likelihood and shape of such legislation.
In finding that only small numbers of people and organizations typically submit-
ted testimony when Benefit Corporation legislation was discussed and debated,
Rawhouser, Cummings, and Crane’s work shows that anyone wanting to influ-
ence such legislation in their region often can.25 A second avenue of influence
identified by the same study exists in the certifications that often precede the
implementation of Benefit Corporation legislation, in that companies favoring sig-
nificant social and environmental agendas can add their weight to the trend by
having their commitments certified by organizations such as B Lab.26

Design Flexible Hybrid Organizations that Align Mission with Profit

The ability of hybrid entrepreneurs to develop innovative business models
and strategies that balance the risk of mission drift with the risk of financial insol-
vency is vital, and Santos, Pache, and Birkholz recommend that business models
characterized by a strong alignment between profit and social impact and a rela-
tively simple value chain increase the likelihood of being sustainable.27 Various
types of business model innovations, these authors found, further influence the
types of challenges hybrid organizations will face and the strategies they need to
employ to attract funding. Perhaps more fundamentally, the choice that hybrids
make about legal form will have strategic implications for them. Haigh, Dowin
Kennedy, and Walker found that the legal form serves as a vehicle to balance
social and financial needs, rather than being an ideal target in itself.28 Therefore,
used as a strategic tool, hybrids’ flexibility with regard to their legal form will grant
them access to certain types of funding or partnerships. Their findings are partic-
ularly interesting and can inform the needs of hybrid organizations with regard to
funding and earning revenue, which can shape future developments in the social
finance and impact investing spheres.

Traditional Firms Can Leverage Hybrid Structures and Strategies

A theme among the articles in this special issue is that firms can use hybrid
structures and strategies to further their commitment to social and environmental
goals by collaborating with hybrids or by adopting relevant elements of hybrid
structures and strategies.29 Haigh, Dowin Kennedy, and Walker showed that
hybrids may be willing to alter their legal structure to enter the right strategic
partnership, and Hockerts30 recommended that firms consider developing part-
nerships with hybrids to identify currently hidden asset complementarities. San-
tos, Pache, and Birkholz31 offered practicing managers four levers to adapt their
strategic positioning in a competitive landscape that is increasingly focused on
social issues: governance, organizational structure, human resource processes,
and performance management systems.

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 Hybrid Organizations: Origins, Strategies, Impacts, and Implications

In concurrence with Santos, Pache, and Birkholz,32 Hockerts33 finds that

innovations by hybrids are diffusing into and proving successful in mass markets,
which leads to the recommendation that firms cultivate a culture of open innovation.
Indeed, hybrids’ search for market disequilibria leads them to complement rather
than enter into fierce competition with companies they perceive to be driven by
similar societal goals. To that point, Lee and Jay34 also show how hybrids can serve
as allies to established companies in the conduct of their sustainability strategies.
The benefits of such a “non-zero sum competition” mindset include that hybrids
serve as incubators for new practices that can then gain scale and impact when
infused into the collaborating firm. Key to the realization of these alliances (or even
acquisitions) is the identification of some sustainable orientation within customers,
employees, and other stakeholders, and the willingness of a hybrid to enter into
an arrangement that would advance the collaborating firm’s sustainability strategy.
Indeed, as Lee and Jay35 indicate, potential challenges may arise for a hybrid
relating to the authenticity of its values, organizational identity, and culture. Hybrids
must balance these challenges with the potential for upscaling impact and positive
network effects often achieved by collaborating with larger corporations.

Learn to Identify Both Positive and Negative Impacts of Conducting

Business
A final important take-away from this special issue is that a key component
of successful social value creation is understanding the positive and negative impacts,
which stakeholders they are affecting, and the possible trade-offs they imply.36 Holt
and Littlewood37 highlight the importance of acknowledging context embedded-
ness of hybrid solutions. The Hy-Map process they propose can help to address
the variability that hybrids face in terms of context, social mission, and hybridity
of their business model. For managers of traditional firms, the Hy-Map model serves
as a useful template that can facilitate the identification and tracking of positive and
negative impacts felt by a wide range of stakeholders that might normally be treated
as externalities and thus overlooked by traditional stakeholder or risk analyses.

Concluding Thoughts
Our common goal in this special issue has been to contribute to the increas-
ing levels of research and activity around the utilization of hybrid organizations to
create sustainable social value at scale. The evolution of such organizations is at an
early stage, and many stages will occur in the future that shape and form the
resulting marketplace. This special issue provides a resource of objective recom-
mendations for managers, practitioners, and entrepreneurs to use as they create,
grow, and sustain their organizations. While much work remains, we look for-
ward to further achievements and to the next series of research and publications
focusing on this very important and transformational sector.

Notes
1. Lifestyles of Health and Sustainability (LOHAS), <www.lohas.com/about>, accessed January 3,
2015.

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 Hybrid Organizations: Origins, Strategies, Impacts, and Implications

2. USSIF, “Report: Socially Responsible Investing Assets in US Top $3 Trillion; Nearly 1 Out of
Every 8 Dollars Under Professional Management,” 2010, <http://ussif.org/news/releases/
pressrelease.cfm?id=168>, accessed August 12, 2011.
3. G.M. Kistruck and P.W. Beamish, “The Interplay of Form, Structure, and Embeddedness in
Social Intrapreneurship,” Entrepreneurship Theory and Practice, 34/4 (July 2010): 735-761.
4. J. Battilana and M. Lee, “Advancing Research on Hybrid Organizing – Insights from the Study
of Social Enterprises,” The Academy of Management Annals, 8/1 (2014): 397-441; J. Battilana,
M.Lee, J. Walker, and C. Dorsey, “Search of the Hybrid Ideal,” in Stanford Social Innovation
Review, 10/3 (Summer 2012): 51-55.
5. T. Ellis, The New Pioneers: Sustainable Business Success through Social Innovation and Social Entre-
preneurship (Chichester: John Wiley & Sons, 2010).
6. J.G. Dees, “Enterprising Nonprofits,” Harvard Business Review, 76/1 (January/February 1998):
54-67.
7. J. Kickul and T.S. Lyons, Understanding Social Entrepreneurship: The Relentless Pursuit of Mission in
an Ever Changing World (New York, NY: Routledge, 2012); M.T. Dacin, P.A. Dacin, and
P. Tracey, “Social Entrepreneurship: A Critique and Future Directions,” Organization Science,
22/5 (2011): 1203-1213.
8. B Lab, <http://bcorporation.net/>, accessed February 4, 2015.
9. H. Rawhouser, M. Cummings, and A. Crane, “Benefit Corporation Legislation and the Emer-
gence of a Social Hybrid Category,” California Management Review, 57/3 (Spring 2015).
10. S. Bacq, C. Hartog, and B. Hoogendoorn, “Beyond the Moral Portrayal of Social Entrepre-
neurs: An Empirical Approach to Who They Are and What Drives Them,” Journal of Business
Ethics, online November 19, 2014.
11. J. O’Toole and D. Vogel, “Two and a Half Cheers for Conscious Capitalism,” California Manage-
ment Review, 53/3 (Spring 2011): 60-76.
12. F. Santos, A.-C. Pache, and C. Birkholz, “Making Hybrids Work: Aligning Business Models and
Organizational Design for Social Enterprises,” California Management Review, 57/3 (Spring
2015).
13. N. Haigh, E. Dowin Kennedy, and J. Walker, “Hybrid Organizations as Shape-Shifters: Altering
Legal Structure for Strategic Gain,” California Management Review, 57/3 (Spring 2015).
14. K. Hockerts, “How Hybrid Organizations Turn Antagonistic Assets into Complementarities,”
California Management Review, 57/3 (Spring 2015).
15. A.J. Hoffman, K.K. Badiane, and N. Haigh, “Hybrid Organizations as Agents of Positive Social
Change: Bridging the For-Profit & Non-Profit Divide,” in K. Golden-Biddle and J. Dutton, eds.,
Using a Positive Lens to Explore Social Change and Organizations: Building a Theoretical and
Research Foundation (New York, NY: Routledge, Taylor and Francis Group, 2012), pp. 131-
153; F.M. Santos, “A Positive Theory of Social Entrepreneurship,” Journal of Business Ethics,
111/3 (December 2012): 325-351.
16. British Council, “What Will Social Enterprise Look Like in Europe by 2020?” 2014, <www.
britishcouncil.org/europe/our-work-in-europe/social-enterprise>, accessed September 20, 2014.
17. Z.D. Kaufman, “Social Entrepreneurship in the Age of Atrocities: Introduction,” in Z.D. Kaufman,
ed., Social Entrepreneurship in the Age of Atrocities: Changing Our World ( Cheltenham, UK: Edward
Elgar, 2012), pp. 1-19; J. Clifford, K. Markey, and N. Malpani, Measuring Social Impact in Social
Enterprise: The State of Thought and Practice in the UK (London: E3M, 2013).
18. Kickul and Lyons, op. cit.; J. Ormiston and R. Seymour, “Understanding Value Creation in
Social Entrepreneurship: The Importance of Aligning Mission, Strategy and Impact Measure-
ment,” Journal of Social Entrepreneurship, 2/2 (2011): 125-150.
19. J. Jay, “Navigating Paradox as a Mechanism of Change and Innovation in Hybrid Organiza-
tions,” Academy of Management Journal, 56/1 (February 2013): 137–159.
20. D. Holt and D. Littlewood, “Identifying, Mapping, and Monitoring the Impact of Hybrid
Firms,” California Management Review, 57/3 (2015).
21. M. Lee and J. Jay, “Strategic Responses to Hybrid Social Ventures,” California Management
Review, 57/3 (Spring 2015).
22. N. Haigh and A.J. Hoffman, “Hybrid Organizations: The Next Chapter of Sustainable Busi-
ness,” Organizational Dynamics, 41/2 (2012): 126-134.
23. O’Toole and Vogel, op. cit.
24. Lee and Jay, op. cit.
25. Rawhouser, Cummings, and Crane, op. cit.
26. B Lab, op. cit.
27. Santos, Pache, and Birkholz, op. cit.

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 Hybrid Organizations: Origins, Strategies, Impacts, and Implications

28. Haigh, Dowin Kennedy, and Walker, op. cit.

29. Ibid.
30. Hockerts, op. cit.
31. Santos, Pache, and Birkholz, op. cit.
32. Ibid.
33. Hockerts, op. cit.
34. Lee and Jay, op. cit.
35. Ibid.
36. Hockerts, op. cit.
37. Holt and Littlewood, op. cit.

California Management Review, Vol. 57, No. 3, pp. 5–12. ISSN 0008-1256, eISSN 2162-8564. © 2015 by
The Regents of the University of California. All rights reserved. Request permission to photocopy or
reproduce article content at the University of California Press’s Rights and Permissions website at
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