Of Causality and Comparability: Evaluating Hybrid Viability in Social Enterprise

• In Event: Evaluating social enterprise and social innovation

Abstract

Social enterprises are an idealized form of hybrid organising. combining a mission to create social value, while generating enough revenue to ensure financial sustainability (Battilana & Lee, 2014; Kerlin 2010). Many social enterprises must perform a delicate balancing act of hybridity – ensuring that the commercial business model leads to social impact and that carrying out their social mission is financially sustainable. This dilemma lead to an important question that I address in this study – how do we determine the viability of the hybrid model for a social enterprise?
There is a long tradition of measuring social impact through evaluation and performance measurement in the public and nonprofit sectors (Benjamin et al., 2022), which has recently been adapted to social enterprises. Recent scholarship has examined these issues but overlooks some key aspects. First, hybrid organizations risk both 'mission drift' (prioritizing commercial objectives over social objectives) and 'revenue drift' (neglecting commercial activities in favour of social objectives). Second, while there are many efforts to compare social performance, there is relatively less attention to answering underlying questions of cause-and-effect, when interrogating social enterprises. I propose a conceptual model that draws on foundational scholarship in evaluation studies on ‘valuing’, ‘methods’, and ‘use’ (Alkin & Christie, 2004) to illustrate how evaluation can inform hybrid organizational design by testing cause-and-effect assumptions along both social and financial dimensions.
I develop case studies on two social enterprise sectors - microfinance and malaria bednets, which were extensively and rigorously evaluated in the 2000s. I summarise the findings of multiple randomised controlled trials that tested both social and financial dimensions of hybrid viability and influenced the redesign of social enterprises in these fields. In microfinance, multiple evaluations found that access to microcredit had no impact on household income, business performance, or other socio-economic variables. These results led to a recalibration of the sector’s social goals, leading many social enterprises to offer a wider array of services like savings and micro-insurance under the overarching objective of financial inclusion.
In the case of malaria bednets, multiple studies had demonstrated the effectiveness of bednets as the best protection against malaria, but there was still debate about the most effective delivery mechanism. Previously funded through public and philanthropic funds, many social enterprise founders argued that private markets were the only way to attain universal coverage. However, successive evaluations demonstrated the lack of financial viability of this hybrid model, finding that charging even a small price for bednets dramatically reduced usage. Eventually, the World Health Organisation concluded that anti-malaria bednets should be distributed for free, rather than sold, for maximum public health benefit (Trelstad, 2008). Most social enterprises selling bednets moved away from hybrid business models to more traditional charitable distribution.
Through these comparative cases, I show how the hybrid nature of social enterprise necessitates asking questions of both social and financial performance together, rather than separately. Consequently, I illustrate how asking and answering causal questions of social and financial performance may inform hybrid organizing and ultimately the flow of resources to organizations in these fields.

References

REFERENCES
Alkin, M., & Christie, C. (2004). An Evaluation Theory Tree. In M. Alkin, Evaluation Roots (pp. 13–65). SAGE.
Battilana, J., & Lee, M. (2014). Advancing research on hybrid organizing–Insights from the study of social enterprises. Academy of Management Annals, 8(1), 397-441.
Benjamin, L. M., Ebrahim, A., & Gugerty, M. K. (2022). Nonprofit Organizations and the Evaluation of Social Impact: A Research Program to Advance Theory and Practice. Nonprofit and Voluntary Sector Quarterly.
Kerlin, J. A. (2010). A comparative analysis of the global emergence of social enterprise. VOLUNTAS: international journal of voluntary and nonprofit organizations, 21(2), 162-179.
Trelstad, B. (2008). Simple Measures for Social Enterprise. Innovations: Technology, Governance, Globalization, 3(3), 105–118.

Author

• Saurabh Lall