Market Emergence, Hybridization and the Use of Social Finance in the UK Charity Sector

Abstract

Due to increasing pressure from the broader institutional environment, long standing industries dominated by one logic are becoming more complex. This paper looks at how emerging “hybrid” opportunities (i.e. an opportunity combining two logics) encourages executives of organizations characterized by a rigid institutional logic to challenge their organization’s and environment’s dominant logic. Through an in-depth case-study of the emergent use of social finance by charities in the UK, we describe a process by which organizational leaders introduce hybridity into their organization by engaging with the social impact investment market. Our process model describes how leaders with in-depth knowledge of two logics cognitively identify and screen an opportunity in the emerging market. Once completed, they begin to change the organization across dimensions that conflict with the new logic using three mechanisms– framing, enveloping external experts and building alliances. We then show that firms can engage with the new market if this process is successful or engage with it symbolically if the change process is only partially successful. These findings provide the first in-depth description of a process of hybridization and in doing so increase our knowledge of how hybridization works, how executives embedded in one logic can act as agents of institutional change and how hybrid market opportunities are taken.