When Internal Representation Leads to Faultlines. A Study of Board Performance in Social Enterprises

Abstract

Hybrid organizations, such as social enterprises, are exposed to different institutional logics, which are potentially conflicting. There is a growing interest in how such organizations internally deal with reconciling and uniting different logics. Particularly, internal representation in the board, obtained by appointing board members representing the different logics, has been suggested as a way to balance different logics. However, the effects of internal representation on board performance and subsequent organizational performance remain unclear. This study takes a faultline perspective to study internal representation on the board of social enterprises. Our results reveal that faultlines negatively influence board service performance and that this relationship is mediated by task conflict. Furthermore, our study reveals the importance of clear and shared organizational goals in attenuating the negative effects of faultlines.