business in society

By Verena Girschik and Jasper Hotho

As evidenced in places such as Syria and Yemen, humanitarian crises are becoming ever more complex (OCHA, 2017a). In response, international and humanitarian organizations increasingly call upon the private sector to help alleviate human suffering. As we describe in our recent article (Hotho & Girschik, 2019), many companies have answered this call. In the past, the role of companies in humanitarian crises tended to be limited to financial or in-kind donations. Today, more and more companies seek a direct role in the delivery of humanitarian action, often through collaborative partnerships with humanitarian organizations.

Why invest in business-humanitarian collaboration?

Companies that engage in humanitarian initiatives often do so for philanthropic reasons. However, these companies may fail to appreciate that engagement in humanitarian initiatives can also provide them with longer-term strategic advantages (OCHA 2017b).

To begin with, business-humanitarian collaboration likely has reputational and motivational benefits. Contributions to humanitarian relief efforts send positive signals to external stakeholders, including customers and governments, as well as internal employees.

However, companies may also benefit in more tangible ways.

First, engaging directly in the delivery of humanitarian assistance can provide firms with the opportunity to learn about new countries and markets. For example, MasterCard’s payment solutions for humanitarian crisis situations allow the company to contribute to a good cause while developing a more detailed understanding of under-explored areas that may at a later stage become potential markets.

In addition, humanitarian engagement provides opportunities for relationship building with international organizations, governments, and local communities. Such connections can enhance a firms’ competitiveness as they may unlock or facilitate interesting market opportunities down the line.

Humanitarian crisis contexts also provide companies with opportunities to develop new skills and competencies or strengthen existing ones. For example, by participating in the Logistics Emergency Team—a business alliance providing UN agencies with vital logistical support—companies such as A.P. Møller-Mærsk have the opportunity to push their logistical capabilities while providing life-saving support during complex emergencies.

Business-humanitarian partnerships must address three fundamental challenges

Notwithstanding the potential of business-humanitarian partnerships, the extreme conditions of humanitarian crises renders such collaboration especially complicated and risky. Humanitarian assistance is often delivered to vulnerable populations in politically complex and volatile contexts. As a result, partners face three fundamental challenges that they need to be prepared to address if they are to leverage the potential of their collaboration.

1. Securing ethical engagement

The first challenge is to ensure that private-sector involvement is ethically sound and aligned with the humanitarian principles of humanity, impartiality, neutrality, and independence. Companies and their humanitarian partners need to uphold these principles in spite of commercial interests and practical constraints.

2. Realizing effective engagement

Collaborations between humanitarian organizations and companies are complex to navigate. Partners need to find ways to build mutual understanding and trust and create a favorable climate for mutual problem-solving. In addition, both sides may need to adjust processes and operations in order to align capabilities and enable effective collaboration.

3. Sustaining business-humanitarian partnerships

Companies and their humanitarian partners often struggle to demonstrate measurable benefits from their collaborations. Companies need to sustain internal support for such partnerships even when there is no immediate business case. In addition, humanitarian organizations need to engage companies in the right place at the right time; namely, where humanitarian needs are greatest.

Addressing these three challenges is neither quick nor easy. It is through strong mutual commitments and innovative responses that business-humanitarian partnerships can leverage their potential and deliver humanitarian assistance ethically, effectively, and sustainably.

References:

Hotho, J., & Girschik, V. (2019). Corporate engagement in humanitarian action: Concepts, challenges, and areas for international business research. critical perspectives on international business, 15(2/3), 201-218.

OCHA (2017a). Annual Report 2017

OCHA (2017b). The Business Case: A Study of Private Sector Engagement in Humanitarian Action

About the authors

Verena Girschik is Assistant Professor of CSR, Communication, and Organization at the Department of Management, Society and Communication, Copenhagen Business School. Verena’s research focuses on the responsibilities of companies in the contexts of complex societal problems and humanitarian crises. Interested in relations between companies, governments, NGOs, and other societal actors, her research explores how companies negotiate their roles and responsibilities, how they perform them, and to what consequences. Verena’s Twitter: @verenaCPH)

Jasper Hotho is Associate Professor at the Department of International Economics, Government and Business at Copenhagen Business School, and Senior Editor for the top-tier academic journal Organization Studies. Jasper’s research focuses on the opportunities and challenges that arise from private-sector involvement in the delivery of humanitarian assistance.

Image by Colourbox.dk

By Johanna Mair, Nikolas Rathert and Georg Reischauer.

Sharing Economy Organizations

Uber, Airbnb, and Lyft are frequently cited and popular examples of new organizational forms operating in the sharing economy, which is growing at a stunning pace. One way to make sense of the sharing economy is to conceive it as a web of markets in which individuals use diverse forms of compensation to transact the redistribution of and access to resources (Mair & Reischauer, 2017).

These transactions are mediated by a digital platform run by an organization that focuses on the governance of these transactions (Reischauer & Mair, 2018a, b). Besides the focus on platform-enabled business models, the sharing economy has also spurred discussions about the implications of the sharing economy for society. Many commentators have argued that the sharing economy can become key in making modern societies more environmentally sustainable (Frenken & Schor, 2017) and inclusive (Etter, Fieseler, & Whelan, forthcoming). This debate parallels the debates on another important organizational form, social enterprises (Mair & Rathert, 2019).

Social Enterprises

Social enterprises encompass a diverse set of legal and organizational forms that use market means to effect social change (Mair & Marti, 2006). They address a range of social problems on different scales, including local communities and countries, and target societal groups that usually remain outside the reach of both commercial markets and state-run welfare schemes (Mair, Wolf, & Seelos, 2016). Social enterprises use a variety of commercial activities, including the selling of products and services, and include beneficiaries in various stages of the value creation chain (Mair & Martí, 2006; Mair, Battilana, & Cardenas, 2012). As this discussion suggests, social enterprises might have much in common with sharing economy organizations.

Social Enterprises = Sharing Economy Organizations?

Social enterprises and sharing economy organizations are both alternative forms of organizing that have developed to overcome the deficiencies of contemporary capitalism (Mair & Rathert, 2019). But what are the similarities and differences of these forms, especially with respect to dimensions that have been identified as relevant for both forms, community (Fitzmaurice et al., forthcoming; Venkataraman, Vermeulen, Raaijmakers, & Mair, 2016) and growth (Mair & Reischauer, 2017; Seelos & Mair, 2017)?
We shed light on this question with a comparative analysis of a sample of German social enterprises and sharing economy organizations, which we surveyed in 2015/2016 (social enterprises) and 2018 (sharing economy organizations). This sample encompasses 108 social enterprises and 233 sharing economy organizations that can be meaningfully compared along several indicators, including age and profit orientation. These organizations span a variety of activity fields (e.g., health care and education in the case of social enterprises, or mobility and accommodation in the case of the sharing economy).

Social Enterprises ≠ Sharing Economy!

Our analysis provides first insights that social enterprises and sharing economy organizations are, in fact, quite different animals when it comes to community and growth.
Asking both about the role of community for improving existing products, the community seems more relevant for social enterprises (Figure 1). In fact, on a 7-point scale, social enterprises’ score is over 6 on average, compared to 3.9 for sharing economy organizations. This difference remains significant after controlling for age, profit orientation, and activity field.

Figure 1: Role of Community for Product Improvement

There are also differences when asking about the role of community for entering new markets. As shown in Figure 2, sharing economy organizations use the community for this purpose to a slightly greater extent (using a yes/no variable whether or not they use the community for this purpose, with the difference being statistically significant). At the same time, the salience of the community for this purpose appears as overall lower than for product improvement.

Figure 2: Role of Community for New Market Entry

There are notable differences when it comes to growth orientation. While 79% of the surveyed social enterprises have a strong growth orientation, this is only true for 36% of sharing economy organizations. When we regress growth orientation on profit orientation and fields of activity, we find that the lack of growth orientation appears to be driven by membership in the field of room sharing, while the fields of mobility, development and housing, and health appear to be associated with a greater growth orientation.

Besides, not all growth challenges are the same (figure 3). Our analysis suggests some that some growth challenges are specific to sharing economy organizations and social enterprises, respectively. Social enterprises are more worried about three aspects: preserving program quality, securing capital, and managing growth internally. Sharing economy organizations, in contrast, care more about fidelity to the mission and managing growth internally. When accounting for profit orientation, we find that those who are profit-oriented worry about securing capital, while those that are not worried about fidelity to the mission as they grow.

Our analysis further identifies the variation concerning geographical growth (Figure 4). Sharing economy organizations are not looking to change their geographical scope. At most, some are considering changing from a local orientation to a regional orientation. Social enterprises are more ambitious here, often looking to scale their model to a national scale or even beyond.

Figure 4: Aspirations for Geographical Growth

Embracing Alternative Organizational Forms

Our comparison of sharing economy organizations and social enterprises for the role of community and growth indicates that alternative forms of economic organizing differ in various ways. We take this as a positive sign that also reflects a societal ability to nurture and institutionalize alternative forms of organizing that can potentially overcome well-known deficiencies of capitalism. Future research will tell how these two forms will develop, create impact, and contribute to a more sustainable society.

Acknowledgements

This research was funded by the German Federal Ministry of Education and Research (Grant Number 01UT1408C) and the European Union Seventh Framework Programme (Grant Agreement 613500).

About the authors

Johanna Mair is Professor of Organization, Strategy and Leadership at the Hertie School of Governance, Germany. She is also the Co-director of the Global Innovation for Impact at the Stanford Center on Philanthropy and Civil Society and the Academic Editor of the Stanford Social Innovation Review.

Nikolas Rathert is Assistant Professor for Organization Studies at Tilburg University.

Georg Reischauer is a postdoctoral research associate at Vienna University of Economics and Business (WU) and at Johannes Kepler University Linz (JKU).

References

Etter, M., Fieseler, C., Whelan, G. forthcoming. Sharing Economy, Sharing Responsibility Corporate Social Responsibility in the Digital Age. Journal of Business Ethics, doi: 10.1007/s10551-019-04212-w.
Fitzmaurice, C. J., Ladegaard, I., Attwood-Charles, W., Cansoy, M., Carfagna, L. B., Schor, J. B., & Wengronowitz, R. forthcoming. Domesticating the market: moral exchange and the sharing economy. Socio-Economic Review, doi: 10.1093/ser/mwy003.
Frenken, K., & Schor, J. 2017. Putting the sharing economy into perspective. Environmental Innovation and Societal Transitions, 23: 3-10.
Mair, J., Battilana, J., & Cardenas, J. 2012. Organizing for Society: A Typology of Social Entrepreneuring Models. Journal of Business Ethics, 111(3): 353-373.
Mair, J., & Martí, I. 2006. Social entrepreneurship research: A source of explanation, prediction, and delight. Journal of World Business, 41(1): 36-44.
Mair, J., & Rathert, N. 2019. Alternative organizing with social purpose: Revisiting institutional analysis of market-based activity. Socio-Economic Review, doi: 10.1093/ser/mwz031.
Mair, J., & Reischauer, G. 2017. Capturing the dynamics of the sharing economy: Institutional research on the plural forms and practices of sharing economy organizations. Technological Forecasting and Social Change, 125: 11-20.
Mair, J., Wolf, M., & Seelos, C. 2016. Scaffolding: A process of transforming patterns of inequality in small-scale societies. Academy of Management Journal, 59(6): 2021-2044.
Reischauer, G., & Mair, J. 2018a. How organizations strategically govern online communities: Lessons from the sharing economy. Academy of Management Discoveries, 4(3): 220-247.
Reischauer, G., & Mair, J. 2018b. Platform organizing in the new digital economy: Revisiting online communities and strategic responses. Research in the Sociology of Organizations, 57: 113-135.
Seelos, C., & Mair, J. 2017. Innovation and scaling for impact: How effective social enterprises do it. Stanford, CA: Stanford University Press.
Venkataraman, H., Vermeulen, P., Raaijmakers, A., & Mair, J. 2016. Market meets community: Institutional logics as strategic resources for development work. Organization Studies, 37(5): 709-733.

Photo

Photo by Markus Winkler on Unsplash