Exploring the microfoundations of hybridity: A judgment-based approach

Abstract

We explore the concept of organizational hybridity from the perspective of the Judgment-Based Approach to entrepreneurship (JBA). The JBA provides much-needed microfoundations for hybridity in the form of a more nuanced, action-based view of the market mechanism in shaping enterprises. Rather than a problem of conflicting logics at the organizational level, hybridity is redefined as entrepreneurial judgment at the individual level about combinations of monetary and psychic profit. Viewed this way, hybridity is a universal characteristic of real-world enterprises rather than a defining feature of a specific subset of them. This approach thus ultimately reshapes our understanding of hybridity and suggests an alternative view that is less conflictual and insular, and more conciliatory and integrated. It also sheds light on various problems facing such enterprises, including strategy formation, practical wisdom, normative pressures, mission drift, entrepreneurial groups, and public policy.

Executive summary

Hybrid enterprises are said to combine different logics or orientations within an organization. These logics are typically described as either economic or social, and are usually conceived as existing in inherent tension with each other; hence, hybrid enterprises are neither conventional monetary profit-seeking businesses nor purely social or charitable organizations, but some awkward, possibly paradoxical combination of both. The best-known and most frequently studied types of hybrids are social enterprises, which straddle the line between monetary profit-seeking and the pursuit of broader social goals or social value.

The literature on hybrids is growing rapidly, but to date there has been little agreement over its fundamental concepts and frameworks, and key questions remain about the origins, meaning, and development of hybrids. There is particular debate about whether the different “logics” of hybrids are necessarily in tension or conflict, or whether they exist harmoniously, as complements. Are hybrids just another form of profit-seeking market organization? As organizations, are they puzzles to solve, or perhaps paradoxes to confront? Answering these questions is crucial for understanding of what hybrids are, how they work, and what their broader implications are for economy and society.

We address to these debates by developing a new conceptual basis for studying hybrid enterprises. We argue that current controversies are usually the result of studying hybridity only at the organizational level. In response, we explore the microfoundations of hybridity, showing that what is called hybrid organizing simply reflects entrepreneurs' choices about how to pursue monetary profits and psychic profits. Drawing on the Judgment-Based Approach to entrepreneurship (JBA), we show how entrepreneurial decision-making constantly negotiates the boundaries of monetary calculation and profit-seeking and alternative, non-monetary goals such as providing social benefits. Understanding the interplay between the monetary and psychic profit leads to a more realistic and nuanced account of the causal foundations of hybridity, while also dispelling some confusions that have arisen in the literature. Ultimately, what is called hybridity at the organizational level is simply the result of entrepreneurial action at the individual level about combinations of profit.

This approach leads to several notable results. First, it emphasizes that all enterprises are to some extent social and contain elements of what is called hybridity. Second, as a result, microfoundations challenge the importance of hybridity as such as a key construct. What is called hybridity is not a defining characteristic of certain organizations, but exists in all enterprises, and is a persistent aspect of entrepreneurial decisions regarding how to organize and restructure firms. Third, a micro-level approach dissolves the perceived tension between different logics in the enterprise, promoting a view that is less conflictual and insular, and more conciliatory and integrated. Fourth, microfoundations can help connect meso- and macro- level research as a way of encouraging a more comprehensive research program that includes all sizes and shapes of enterprise. Fifth, they also shed light on various problems facing enterprises of all types, including strategy formation, practical wisdom, normative pressures, mission drift, entrepreneurial groups, and public policy.