Hybrid organization explained

A hybrid organization is an organization that mixes elements, value systems and action logics (e.g. social impact and profit generation) of various sectors of society, i.e. the public sector, the private sector and the voluntary sector. A more general notion of hybridity can be found in Hybrid institutions and governance.

According to previous research hybrids between public and private spheres consist of following features:

1. Shared ownership.
2. Goal incongruence and different institutional logics in the same organisation.^[1]
3. Variety in the sources of financing.
4. Differentiated forms of economic and social control.^[2]

Value creation in hybrids proceeds through three mechanisms

1. mixing,
2. compromising,
3. legitimizing.

Mixing distinct value categories may take several forms. One common feature of these forms is the act of combining existing value categories to contribute novel variants of value. Compromising concern solving grievances among the interacting parties. From the legitimization point of view, hybrids are attuned to catering to the demands of multiple audiences: the government, citizens and clients, as well as the competitive markets.^[3]

The discussion of relational aspects of hybridity among nodes, dyads and networks raises number of questions. Sometimes governing hybridity necessitates a balancing act among parallel and opposing forces. In other instances, hybridity represents an effort to build genuinely new interaction patterns to settle the issues at hand, but it is also the case that hybridity brings out restrictions on interaction patterns.^[4]

The hybridity can be studied across levels of society in micro, meso and macro settings. However, aggregation of institutions follow different patterns within government, business and civil society.^[5] The relational aspect appears as integration and separation (node), in dyads between e.g professionals and managers and between providers and beneficiaries, and within networks as actors with different attributes.^[6]

Hybrid organization can achieve a competitive advantage because it can easily adapt into rapidly changing business environment. Organizational hybridity refers to an ability to blend features from different organizations or cultures to create solutions which suits organization's needs.^[7] In addition, hybrid organizations can achieve long-term sustainability by blending social and economic imperatives and engaging with diverse stakeholder groups.^[8]

Hybrid organizations and knowledge strategies

In hybrid organizations there are private, public and non-profit organizations collaborating together. All these organizations have their own knowledge strategies and the hybrid organization needs to manage a comprehensive knowledge strategy of the entire hybrid organization. This makes the challenges of the hybrid organizations interdependent and multidimensional. In order for a hybrid organization to succeed in creating a knowledge strategy, it must pay attention to the following three things in particular:

• The most critical knowledge assets must be identified.
• The entity responsible for strategic decision-making must be determined, as well as the information on which the decisions are based on.
• A new hybrid organization needs to clearly outline its identity and how to combine the values, goals and organizational cultures of different organizations.

Differences between public and private sector

Hybrid organizations are found in both the private and public sectors, but there may be differences in their goals and governance structures: private and public organizations all in all usually have different drivers and organizational structures. Basically public and private sector organizations differ from each other from the point of view of their environment, organization-environment transactions and organizational roles, structures and processes.^{[9] [10]}

In private sector, hybrid organizations are often motivated by profit and create social or environmental value, as a means to achieve financial goals. In contrast, public sector hybrid organizations usually prioritize social or environmental objectives and use financial sustainability as a means to achieve their mission.

Furthermore, public sector hybrid organizations may be subject to more strict regulatory frameworks and may be required to report on a broader range of standards than private sector hybrid organizations.^[11]

Terminology

Borys and Jemison introduced the concept of "hybrid organizational arrangements", aligning the concept with strategic alliances, R&D partnerships, joint ventures and licensing. The authors reviewed prior research and provided a qualitative framework for classification of different types of hybrid organizational arrangements consisting of breadth of purpose, boundary determination, value creation and stability mechanisms.^[12]

Later, Oliver Williamson^[13] introduced the concept of a "hybrid form" in transaction cost economics.^[13] A hybrid form can be defined as "a set of organizations such that coordination between those organizations takes place by means of the price mechanism and various other coordination mechanisms simultaneously"^[14]

Effects

As hybrid organizations combine diverse stakeholder groups, the potential for conflict within them might be greater. This is the challenge of stakeholder management.^[15] In addition, conflicts can occur because hybrid organizations need to balance between institutional demands and stakeholder interests ^[16]

This problem is similarly emphasized from the perspective of agency theory. The so-called 'multiple principal problem' combines various collective action problems that can occur with hybridity.^[17] Free-riding or duplication in steering and monitoring procedures can result in high costs. Similarly, directive ambiguity or lobbying of the corporations by individual stakeholders can induce inefficiency.

Any tensions can have positive and negative economic, performance related, cultural and governance related effects for the organization, its principles, and its customers. For instance, for state-owned enterprises, Schmitz^[18] argues that the combination of public and private interests brings an optimal combination of incentives for reducing costs and improving quality in comparison with pure production forms.^[19] In contrast, Voorn, Van Genugten, and Van Thiel^[20] hypothesize that diversity of ownership may lead to benefits such as specialization and increased efficiency, but also downsides such as increased failure rates.^[20]

Examples

Examples of hybrid forms of organization include:

• Public service organizations established by societal actors, such as (in the European context) social housing providers, public schools and hospitals.
• Public-sector organizations that behave in a business-like way, such as state-owned enterprises that also compete on the marketplace.
• Private-sector organizations that include franchising, joint ventures, and business groups.
• Benefit corporations or social enterprises who prioritize social and environmental causes while generating profit.
• Associations, especially trade associations encompassing non-profit, impact oriented (public relations, lobbying, special interest groups) with profit oriented activities (e.g. events, seminars, consulting) through a subcompany, mostly a fully-owned subsidiary.
• Microfinance organizations providing financial assistance to underserved populations.^[21]
• Islamic banks that combine religious principles and banking practices.^[22]
• Hybrid corporations engaging in corporate social entrepreneurship, progressing social and environmental activity in addition to returns for shareholders.^[23]
• Hybrid co-operatives involving multiple stakeholder groups.
• Hybrid ventures combining financial, social and environmental value into new ventures. ^[24]

Are hybrid form organizations always intentional?

Not all hybrid forms are intentional as their value creation may take place "by default".^[25] Hemingway's ethnographic study of a British-based multi-national corporation, where corporate social responsibility was found to be practised informally by some employees, in addition to their formal job roles, pointed out that unless a corporate employee was given dispensation from the profit motive in order to specifically create social value, even the most hybrid of corporations could not be described as a social enterprise staffed by social entrepreneurs (although employees' activities outside of the workplace might be). However, she did find evidence of corporate social entrepreneurship, where some employees had enlarged their own job roles to encompass social responsibility, in one or more forms.^[26]

Further reading

• Agostino, D., & Arnaboldi, M. (2017). Rational and ritualistic use of key performance indicators in hybrid organizations. Public Money & Management, 37(6), 409–416. https://doi.org/10.1080/09540962.2017.1344021
• Albert, S., & Whetten, D. A. (1985). Organizational Identity. Research in Organizational Behavior, 7, 263-295. JAI Press, Inc.
• Battilana, Julie & Silvia Dorado. Building sustainable hybrid organizations: The case of commercial microfinance organizations. "Academy of Management Journal, 53:6, 1419–1440.
• Besharov, M. & Mitzinneck, B. (2020). Organizational Hybridity: Perspectives, Processes, Promises. Bingley: Emerald Group Publishing Limited.
• Billis, David (2010): Hybrid Organizations and the Third Sector, Palgrave Macmillan
• Bryan Borys and David B. Jemison (1989): Hybrid Arrangements as Strategic Alliances: Theoretical Issues in Organizational Combinations, Academy of Management Review, April 1, 1989 vol. 14 no. 2 234-249
• Ciesielska, Malgorzata (2010) Hybrid Organisations. A study of the Open Source – business setting. Copenhagen Business School Press http://openarchive.cbs.dk/bitstream/handle/10398/8200/Malgorzata_Ciesielska.pdf?sequence=1
• Denis, J.-L., Ferlie, E., & Van Gestel, N. (2015). Understanding hybridity in public organizations. Public Administration, 93(2), 273–289.
• Douma, Sytse & Hein Schreuder (2013): "Economic Approaches to Organizations", 5th edition, London: Pearson
• Gillett, Alex G. and Kevin D. Tennent (2018). "Shadow hybridity and the institutional logic of professional sport: Perpetuating a sporting business in times of rapid social and economic change." Journal of Management History 24.2: 228-259: https://doi.org/10.1108/JMH-11-2017-0060
• Gillett, A., Loader, K., Doherty, B., & Scott, J. M. (2018). An examination of tensions in a hybrid collaboration: A longitudinal study of an empty homes project. Journal of Business Ethics, 1-19: https://doi.org/10.1007/s10551-018-3962-7
• Hatch, Mary Jo & Anne Cunliffe (2006): Organization Theory: Modern, Symbolic, and Postmodern Perspectives, Oxford University Press
• Hauver, E. & Schneider, A. L. (2016). "Hybrid Organizations: The Next Chapter of Sustainable Business." Journal of Corporate Citizenship, (64), 27-44.
• Hemingway, C.A. (2013a): Corporate Social Entrepreneurship. In Idowu, S.O., Capaldi, N., Zu, L. and Das Gupta, A. (eds.), Encyclopedia of Corporate Social Responsibility, Volume 1. Springer-Verlag Berlin Heidelberg, pp. 546–553.
• Hemingway, C.A. (2013b), Corporate Social Entrepreneurship: Integrity Within. Cambridge University Press. .
• Karré, Philip Marcel (2011): Heads and Tails: Both Sides of the Coin. An Analysis of Hybrid Organizations in the Dutch Waste Management Sector, Eleven International Publishing
• Koppell, Jonathan (2003): The Politics of Quasi-Government, Cambridge University Press
• Kurland, N. (2022). Mission alignment in the hybrid organization: the role of indirect support activities and an activity ecosystem. Social Enterprise Journal, 18(3), 519-540. https://doi.org/10.1108/SEJ-08-2021-0067
• Kurunmäki, L., & Miller, P. (2010). Regulatory hybrids: Partnerships, budgeting and modernising government. Management Accounting Research, 22(4),220–241.
• Laihonen, H., & Kokko, P. (2020). Knowledge management and hybridity of institutional logics in public sector. Knowledge management research & practice, 1–15.
• McMullen, J. S. & Warnick, B. J. (2015) Should We Require Every New Venture to Be a Hybrid Organization? Wiley Online Library. https://doi.org/10.1111/joms.12150
• Mangen, C., & Brivot, M. (2015). The challenge of sustaining organizational hybridity: The role of power and agency. Human Relations, 68(4), 659–684. https://doi . org/10.1177/0018726714539524
• Pache, A.-C., & Santos, F. (2013). Inside the hybrid organization: Selective coupling as a response to competing institutional logics. Academy of Management Review, 56 (4), 972–1001. https://doi.org/10.5465/amj.2011.0405
• Rainey, Hal G. (1996): Understanding and Managing Public Organizations, 2nd ed., Jossey-Bass
• Skelcher, C., & Smith, S. (2015). Theorizing hybridity: Institutional logics, complex organizations, and actor identities: The case of nonprofits. Public Administration, 93(2), 433–448. https://doi.org/10.1111/padm.12105
• Toffel, M. W. & Chatterji, A. K. (2015). "Hybrid Organizations and the Thirds Sector: Challenges for Practice, Theory and Policy." California Management Review, 57(3), 36-58.
• Williamson, Oliver E. (1991): "Comparative Economic Organization: The Analysis of Discrete Structural Alternatives", Administrative Science Quarterly, vol. 36, no 2.

External links

• Hybrid organization definition
• Jonathan G S Koppell, The Politics of Quasi-Government: Hybrid Organizations and the Dynamics of Bureaucratic Contro, Cambridge University Press, 2003

Notes and References

1. [Julie Battilana|Battilana, Julie]
2. Book: Johanson . Jan-Erik . Governing hybrid organisations. Exploring variety of institutional life . Vakkuri . Jarmo . Routledge . 2017 . 978-1-138-65582-9 . New York . en.
3. Book: Vakkuri. Jarmo. Johanson. Jan-Erik. Routledge. 2020. 9780367609498. Hybrid governance, organisations and society. value creation perspectives..
4. Book: Johanson . Jan-Erik . Vakkuri . Jarmo . Governing hybrid networks in organisations and society . E.Elgar.
5. Book: Johanson . Jan-Erik . Vakkuri . Jarmo . Value creation between and among levels of governance . 2020 . Routledge . 9780367222116 . 221–236 . 1.
6. Book: Johanson . Jan-Erik . Governing hybrid networks in organisations and society. In Handbook of Accounting and Public Governance. Exploring Hybridizations . Vakkuri . Jarmo . E.Elgar . 2023 . Grossi G, Vakkuri J . Cheltenham.
7. Laihonen, H. & Huhtamäki, J. (2020). Organisational hybridity and fluidity: deriving newstrategies for dynamic knowledge management. Knowledge Management Research &Practice. Vol. 21. No. 2. Available: https://doi.org/10.1080/14778238.2020.1794993
8. Doherty, B., Haugh, H., & Lyon, F. (2014). Social Enterprises as Hybrid Organizations: A Review and Research Agenda. International Journal of Management Reviews, 16(4), 417-436. Available: https://doi.org/10.1111/ijmr.12028
9. Karre, P. (2022) The thumbprint of a hybrid organization: A multidimensional model for analysing public/private hybrid organizations. Public organization review.
10. Rainey, H. G., & Chun, Y. H. (2007). Public and private management compared. In E. Ferlie, L. E. Lynn, & C. Pollitt (Eds.), The Oxford handbook of public management (1. publ. in paperback., pp. 72–102). Oxford Univ. Press.
11. Verschuere, B., & Brandsen, T. (2019). Hybrid organizations in the public sector: A review and research agenda. Public Management Review, 21(10), 1421-1441
12. Book: Borys and Jemison (1989). Hybrid Arrangements as Strategic Alliances: Theoretical Issues in Organizational Combinations. Academy of Management Journal.
13. Web site: What Are Hybrid Forms and How Can They be Modeled?. 2007-10-08.
14. (Douma & Hein Schreuder, 2013).
15. Freeman, R. Edward (1984). Strategic Management: A stakeholder approach. Boston: Pitman
16. Ebrahim, A., Battilana, J. & Mair, J. (2014). The governance of social enterprises: Mission drift and accountability challenges in hybrid organizations. Research in Organizational Behavior, 34, 81-100. https://doi.org/10.1016/j.riob.2014.09.001
17. Web site: Background, Autonomy, Steering, and Corporate Governance: Determinants of the Effectiveness of (Governance of) Municipal Corporations. Voorn, Bart, Marieke van Genugten, and Sandra van Thiel (2018). Lausanne: EGPA.
18. Web site: Schmitz (2000). Partial Privatisation and Incomplete Contracts; the Proper Scope of Government Reconsidered. FinanzArchiv.
19. Web site: Schmitz (2000). Partial Privatisation and Incomplete Contracts; the Proper Scope of Government Reconsidered. FinanzArchiv.
20. Voorn, Bart, Marieke L. Van Genugten, and Sandra Van Thiel. The efficiency and effectiveness of municipally owned corporations: A systematic review. Local Government Studies. 43. 5. 820–841. 10.1080/03003930.2017.1319360. 2017. 2066/176125. free. free.
21. Book: Battilana and Dorado (2010). Building sustainable hybrid organizations: The case of commercial microfinance organizations. Academy of Management Journal.
22. Gümüsay . Ali Aslan . Smets . Michael . Morris . Timothy . 2020-02-01 . "God at Work": Engaging Central and Incompatible Institutional Logics through Elastic Hybridity . Academy of Management Journal . 63 . 1 . 124–154 . 10.5465/amj.2016.0481 . 169977517 . 0001-4273.
23. Book: Hemingway, Christine . Corporate Social Entrepreneurship . Samuel O. Idowu . Nicholas Capaldi . Liangrong Zu . Ananda Das Gupta . Springer-Verlag . 2013 . 978-3-642-28036-8 . 10.1007/978-3-642-28036-8_363 . Berlin, Heidelberg, Germany . 544–551 . Encyclopedia of Corporate Social Responsibility .
24. McMullen, J. S. & Warnick, B. J. (2015) Should We Require Every New Venture to Be a Hybrid Organization? Wiley Online Library. https://doi.org/10.1111/joms.12150
25. Vakkuri . Jarmo . Johanson . Jan-Erik . Feng . Nancy . Giordano . Filippo . Governance and accountability in hybrid organizations–past, present and future . Journal of Public Budgeting, Accounting & Financial Management . 2 February 2021 . 33 . 3 . 245–260 . 10.1108/JPBAFM-02-2021-0033 . 233634077 .
26. Book: Hemingway, Christine . Corporate Social Entrepreneurship: Integrity Within . Cambridge University Press . 2013 . 978-1107447196 . Cambridge, United Kingdom . 250 . 26 March 2019.