Managing scaling tensions: the case of differentiation and integration in social enterprises

Abstract

Scaling up is a key strategic challenge for social enterprises, organized as hybrid organizations, that pursue multiple, potentially conflicting goals (e.g., profit and social impact), because tensions arising from these conflicting goals become particularly salient in growth phases. Whereas differentiated hybrids exclude beneficiaries from value creation processes, rendering them as sole recipients of social value, integrated hybrids include beneficiaries, making them co-creators of social value. Based on a qualitative case study of 22 German social enterprises, we set out to elucidate how social enterprises, organized as differentiated or integrated hybrids, manage scaling tensions along the scaling process. We find that integrating beneficiaries into value creation, affects their prioritization of scaling strategies, what kinds of scaling tensions emerge and how they strategically respond to tensions throughout the scaling process. We build on a four-stage process model illustrating how the scalability of social enterprises is shaped by differentiation and integration at each stage, from setting goals and conceiving scaling strategies, to their execution and evaluation. Differentiation allows for stronger growth with a higher risk of mission drift, by prioritizing avoidance-based responses to tensions. Integration makes hybrids more perceptive to tensions, allowing for proactive, dialogue-based responses. With our findings we contribute to the extant literature on scaling up social enterprises, tension management in social enterprises and the literature on the influence of institutional settings on hybridity and scalability.