Mission Drift in Microfinance: An Exploratory Empirical Approach Based on Ideal Types

Abstract

Abstract Purpose In this chapter, I develop a theoretical framework to address the financial–social performance debate in strategy research, drawing on literatures on institutional logics and organizational forms. Methodology/design I test the theoretical framework using an exploratory empirical approach based on ideal types with global microfinance data. A joint consideration of financial and social performances of microfinance organizations (MFOs) helps classify them into four ideal types – self-sustainable, mission-drifting, failing, and subsidized. I examine how an MFO’s organizational form and the configurations of institutional logics of the nation within which it is embedded jointly explain which ideal type the MFO falls into. Findings Based on a study of 1455 MFOs in 98 countries between 1995 and 2007, I show that the interactions between national institutional logics and organizational forms add significant predicting power in estimating MFOs’ ideal types. Explaining the intricate relationships between the financial and social performance of MFOs thus requires a simultaneous consideration of both the configuration of national logics and organizational forms. Originality/value The theoretical framework introduced in this chapter builds on recent developments in the institutional logics perspective and research on organizational forms, extending our understanding of the financial–social performance relationship among organizations. It also advances the social entrepreneurship literature by focusing our attention on various institutions at both national and organizational levels that may facilitate or inhibit social venture efficacy.