Recent work has emphasized the role of context in shaping the diversification strategies of social enterprises (SEs), but our understanding remains superficial. We identify two types of context-driven diversification strategies—market development diversification (MDD) and market functioning diversification (MFD)—depending on the type of voids being addressed. We then empirically test how these diversification strategies impact the performance of SEs on the twin dimensions of financial growth and social impact. Using a mixed-method approach of qualitative interviews and a longitudinal database of Indian microfinance firms (MFIs), we find that while MFD positively impacts financial growth, MDD has a positive effect on social impact. Furthermore, we find that the strategic fit (or lack of it) between the SE’s legal form and the type of diversification enhances (undermines) financial growth. However, the strategic fit between the legal form and diversification choice does not amplify social impact. The study contributes to product diversification literature, which has paid limited attention to the role of context.
AbrahamD. T.KalamkarS. S. (2016). Microfinance institutions, responsibility, and strategic direction. Strategic Change, 25(5), 603–612. https://doi.org/10.1002/jsc.2083
2.
AndréK.PacheA.-C. (2016). From caring entrepreneur to caring enterprise: Addressing the ethical challenges of scaling up social enterprises. Journal of Business Ethics, 133(4), 659–675. https://doi.org/10.1007/s10551-014-2445-8
Aragón-CorreaJ. A.SharmaS. (2003). A contingent resource-based view of proactive corporate environmental strategy. Academy of Management Review, 28(1), 71–88.
BattilanaJ.DoradoS. (2010). Building sustainable hybrid organizations: The case of commercial microfinance organizations. Academy of Management Journal, 53(6), 1419–1440.
7.
BattilanaJ.LeeM. (2014). Advancing research on hybrid organizing—Insights from the study of social enterprises. Academy of Management Annals, 8(1), 397–441. https://doi.org/10.1080/19416520.2014.893615
8.
BattilanaJ.LeeM.WalkerJ.DorseyC. (2012). In search of the hybrid ideal. Stanford Social Innovation Review, 10(3), 50–55.
9.
BattilanaJ.SengulM.PacheA.-C.ModelJ. (2015). Harnessing productive tensions in hybrid organizations: The case of work integration social enterprises. Academy of Management Journal, 58(6), 1658–1685. https://doi.org/10.5465/amj.2013.0903
10.
Benito-OsorioD.Ángel Guerras-MartínL.Ángel Zuñiga-VicenteJ. (2012). Four decades of research on product diversification: A literature review. Management Decision, 50(2), 325–344. https://doi.org/10.1108/00251741211203597
11.
BhaweN. M.JhaS. K. (2024). MFIs and financial inclusion: The role of business models. Journal of Development Studies. Advance online publication. https://doi.org/10.1080/00220388.2024.2398448
BloomP. N.ChatterjiA. K. (2009). Scaling social entrepreneurial impact. California Management Review, 51(3), 114–133. https://doi.org/10.2307/41166496
14.
BlundellR.BondS. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
15.
BradachJ. L. (2003). Going to scale: The challenge of replicating social programs. Stanford Social Innovation Review, 1(1), 18–25.
16.
BrutonG. D.AhlstromD.SiS. (2015). Entrepreneurship, poverty, and Asia: Moving beyond subsistence entrepreneurship. Asia Pacific Journal of Management, 32(1), 1–22. https://doi.org/10.1007/s10490-014-9404-x
17.
BrutonG. D.ZahraS. A.Van de VenA. H.HittM. A. (2022). Indigenous theory uses, abuses, and future. Journal of Management Studies, 59(4), 1057–1073. https://doi.org/10.1111/joms.12755
18.
CasselmanR. M.SamaL. M.StefanidisA. (2015). Differential social performance of religiously-affiliated microfinance institutions (MFIs) in base of pyramid (BoP) markets. Journal of Business Ethics, 132(3), 539–552. https://doi.org/10.1007/s10551-014-2360-z
19.
ChakrabartyS.BassA. E. (2014). Corporate governance in microfinance institutions: Board composition and the ability to face institutional voids. Corporate Governance: An International Review, 22(5), 367–386. https://doi.org/10.1111/corg.12071
20.
ChowdhuryR. (2021). The mobilization of noncooperative spaces: Reflections from Rohingya Refugee Camps. Journal of Management Studies, 58(3), 914–921. https://doi.org/10.1111/joms.12612
21.
CornelissenJ. P.AkemuO.JonkmanJ. G. F.WernerM. D. (2021). Building character: The formation of a hybrid organizational identity in a social enterprise. Journal of Management Studies, 58(5), 1294–1330. https://doi.org/10.1111/joms.12640
22.
CullR.Demirgüç-KuntA.MorduchJ. (2009). Microfinance meets the market. Journal of Economic Perspectives, 23(1), 167–192. https://doi.org/10.1257/jep.23.1.167
23.
DacinM. T.DacinP. A.TraceyP. (2011). Social entrepreneurship: A critique and future directions. Organization Science, 22(5), 1203–1213. https://doi.org/10.1287/orsc.1100.0620
24.
DacinP. A.DacinM. T.MatearM. (2010). Social entrepreneurship: Why we don’t need a new theory and how we move forward from here. Academy of Management Perspectives, 24(3), 37–57.
25.
DeesJ. G.AndersonB. B.Wei-SkillernJ. (2004). Scaling social innovation: Strategies for spreading social innovations. Stanford Social Innovation Review, 1(4), 24–32.
26.
DengW.LiangQ.FanP.CuiL. (2020). Social entrepreneurship and well-being: The configurational impact of institutions and social capital. Asia Pacific Journal of Management, 37(4), 1013–1037. https://doi.org/10.1007/s10490-019-09660-6
27.
DohertyB.HaughH.LyonF. (2014). Social enterprises as hybrid organizations: A review and research agenda. International Journal of Management Reviews, 16(4), 417–436. https://doi.org/10.1111/ijmr.12028
28.
EbrahimA.BattilanaJ.MairJ. (2014). The governance of social enterprises: Mission drift and accountability challenges in hybrid organizations. Research in Organizational Behavior, 34, 81–100. https://doi.org/10.1016/j.riob.2014.09.001
29.
FarjounM. (1998). The independent and joint effects of the skill and physical bases of relatedness in diversification. Strategic Management Journal, 19(7), 611–630.
30.
FosfuriA.GiarratanaM. S.RocaE. (2015). Walking a slippery line: Investments in social values and product longevity. Strategic Management Journal, 36(11), 1750–1760. https://doi.org/10.1002/smj.2311
31.
FosfuriA.GiarratanaM. S.RocaE. (2016). Social business hybrids: Demand externalities, competitive advantage, and growth through diversification. Organization Science, 27(5), 1275–1289. https://doi.org/10.1287/orsc.2016.1080
32.
HaighN.KennedyE. D.WalkerJ. (2015). Hybrid organizations as shape-shifters: Altering legal structure for strategic gain. California Management Review, 57(3), 59–82. https://doi.org/10.1525/cmr.2015.57.3.59
33.
HulmeD.ArunT. (2011). What’s wrong and right with microfinance. Economic and Political Weekly, 46(48), 23–26.
34.
ImJ.SunS. L. (2015). Profits and outreach to the poor: The institutional logics of microfinance institutions. Asia Pacific Journal of Management, 32(1), 95–117. https://doi.org/10.1007/s10490-014-9398-4
35.
JhaS. K.BhaweN.SatishP. (2021). Scaling social enterprises through product diversification. Sustainability, 13(21), Article 21. https://doi.org/10.3390/su132111660
36.
KannothraC. G.ManningS.HaighN. (2018). How hybrids manage growth and social–business tensions in global supply chains: The case of impact sourcing. Journal of Business Ethics, 148(2), 271–290. https://doi.org/10.1007/s10551-017-3585-4
37.
KarimL. (2008). Demystifying micro-credit: The Grameen Bank, NGOs, and Neoliberalism in Bangladesh. Cultural Dynamics, 20(1), 5–29. https://doi.org/10.1177/0921374007088053
38.
KarmakarK. G.MohapatraN. P. (2009). Emerging issues in rural credit. The Microfinance Review, 1(1), 1–17.
39.
KhannaT.PalepuK. G. (1997). Why focused strategies may be wrong for emerging markets. Harvard Business Review, 75(4), 41–51.
KhannaT.PalepuK. G. (2010). Winning in emerging markets: A road map for strategy and execution. Harvard Business School Press.
42.
KhouryT. A.PrasadA. (2016). Entrepreneurship amid concurrent institutional constraints in less developed countries. Business & Society, 55(7), 934–969. https://doi.org/10.1177/0007650314567641
43.
KlarinA.SusenoY. (2023). An integrative literature review of social entrepreneurship research: Mapping the literature and future research directions. Business & Society, 62, 565–611. https://doi.org/10.1177/00076503221101611
44.
LanzollaG.MarkidesC. (2021). A business model view of strategy. Journal of Management Studies, 58(2), 540–553. https://doi.org/10.1111/joms.12580
45.
LiedongT. A.PeprahA. A.AmarteyA. O.RajwaniT. (2020). Institutional voids and firms’ resource commitment in emerging markets: A review and future research agenda. Journal of International Management, 26(3), Article 100756. https://doi.org/10.1016/j.intman.2020.100756
46.
MaderP. (2013). Rise and fall of microfinance in India: The Andhra Pradesh crisis in perspective. Strategic Change, 22(1–2), 47–66. https://doi.org/10.1002/jsc.1921
47.
MairJ.MartiI. (2009). Entrepreneurship in and around institutional voids: A case study from Bangladesh. Journal of Business Venturing, 24(5), 419–435. https://doi.org/10.1016/j.jbusvent.2008.04.006
48.
MairJ.MartíI.VentrescaM. J. (2012). Building inclusive markets in rural Bangladesh: How intermediaries work institutional voids. Academy of Management Journal, 55(4), 819–850. https://doi.org/10.5465/amj.2010.0627
49.
MarkidesC. C.WilliamsonP. J. (1994). Related diversification, core competences and corporate performance. Strategic Management Journal, 15(S2), 149–165. https://doi.org/10.1002/smj.4250151010
50.
McMullenJ. S.WarnickB. J. (2016). Should we require every new venture to be a hybrid organization?Journal of Management Studies, 53(4), 630–662. https://doi.org/10.1111/joms.12150
51.
Mendoza-AbarcaK. I.GrasD. (2019). The performance effects of pursuing a diversification strategy by newly founded nonprofit organizations. Journal of Management, 45(3), 984–1008. https://doi.org/10.1177/0149206316685854
52.
MerslandR.NyarkoS. A.SzafarzA. (2019). Do social enterprises walk the talk? Assessing microfinance performances with mission statements. Journal of Business Venturing Insights, 11, Article e00117. https://doi.org/10.1016/j.jbvi.2019.e00117
OmettoM. P.GegenhuberT.WinterJ.GreenwoodR. (2019). From balancing missions to mission drift: The role of the institutional context, spaces, and compartmentalization in the scaling of social enterprises. Business & Society, 58(5), 1003–1046. https://doi.org/10.1177/0007650318758329
56.
PacheA.-C.SantosF. (2013). Inside the hybrid organization: Selective coupling as a response to competing institutional logics. Academy of Management Journal, 56(4), 972–1001. https://doi.org/10.5465/amj.2011.0405
57.
PorterA. J.TuertscherP.HuysmanM. (2020). Saving our oceans: Scaling the impact of robust action through crowdsourcing. Journal of Management Studies, 57(2), 246–286. https://doi.org/10.1111/joms.12515
58.
PrashanthamS.EranovaM.CouperC. (2018). Globalization, entrepreneurship and paradox thinking. Asia Pacific Journal of Management, 35(1), 1–9. https://doi.org/10.1007/s10490-017-9537-9
RandøyT.StrømR. Ø.MerslandR. (2015). The impact of entrepreneur–CEOs in microfinance institutions: A global survey. Entrepreneurship Theory and Practice, 39(4), 927–953. https://doi.org/10.1111/etap.12085
61.
RawhouserH.VillanuevaJ.NewbertS. L. (2017). Strategies and tools for entrepreneurial resource access: A cross-disciplinary review and typology. International Journal of Management Reviews, 19(4), 473–491.
SaebiT.FossN. J.LinderS. (2019). Social entrepreneurship research: Past achievements and future promises. Journal of Management, 45(1), 70–95. https://doi.org/10.1177/0149206318793196
64.
SantosF.PacheA.-C.BirkholzC. (2015). Making hybrids work: Aligning business models and organizational design for social enterprises. California Management Review, 57(3), 36–58. https://doi.org/10.1525/cmr.2015.57.3.36
StephanU.UhlanerL. M.StrideC. (2015). Institutions and social entrepreneurship: The role of institutional voids, institutional support, and institutional configurations. Journal of International Business Studies, 46(3), 308–331. https://doi.org/10.1057/jibs.2014.38
67.
TraceyP.PhillipsN. (2011). Entrepreneurship in emerging markets: Strategies for new venture creation in uncertain institutional contexts. Management International Review, 51(1), 23–39. https://doi.org/10.1007/s11575-010-0066-8
68.
VillaniE.GrecoL.PhillipsN. (2017). Understanding value creation in public-private partnerships: A comparative case study. Journal of Management Studies, 54(6), 876–905. https://doi.org/10.1111/joms.12270
69.
WanW. P.HoskissonR. E.ShortJ. C.YiuD. W. (2011). Resource-based theory and corporate diversification: Accomplishments and opportunities. Journal of Management, 37(5), 1335–1368. https://doi.org/10.1177/0149206310391804
70.
WebbJ. W.KhouryT. A.HittM. A. (2020). The influence of formal and informal institutional voids on entrepreneurship. Entrepreneurship: Theory & Practice, 44(3), 504–526. https://doi.org/10.1177/1042258719830310
71.
WeberC.KroegerA.LambrichK. (2012). Scaling social enterprises—A theoretically grounded framework. Academy of Management Proceedings, 2012(1), 752–766. https://doi.org/10.5465/AMBPP.2012.15804abstract
WhiteL.LockettA.CurrieG.HaytonJ. (2021). Hybrid context, management practices and organizational performance: A configurational approach. Journal of Management Studies, 58(3), 718–748. https://doi.org/10.1111/joms.12609
74.
WichterichC. (2012). The other financial crisis: Growth and crash of the microfinance sector in India. Development, 55(3), 406–412. https://doi.org/10.1057/dev.2012.58
75.
WickertC.PostC.DohJ. P.PrescottJ. E.PrencipeA. (2021). Management research that makes a difference: Broadening the meaning of impact. Journal of Management Studies, 58(2), 297–320. https://doi.org/10.1111/joms.12666
76.
ZajacE. J.KraatzM. S.BresserR. K. F. (2000). Modeling the dynamics of strategic fit: A normative approach to strategic change. Strategic Management Journal, 21(4), 429–453. https://doi.org/10.1002/(SICI)1097-0266(200004)21:4<429::AID-SMJ81>3.0.CO;2-#
