Hybrid Ventures

Andrew C. Corbett, Jerome A. Katz, Andrew C. Corbett, Jerome A. Katz

• Publisher: Emerald Publishing Limited
• Year: 2017
• Print ISBN:
  9781787430785
• eBook ISBN:
  9781787432543
• Topic: Business
• Subtopic: Business General
• Index: Business

This book contains an Open Access chapter.

Recent estimates suggest that millions of people across the world are involved in some form of social venture creation. After over a decade of thoughtful scholarship on social entrepreneurship, researchers have now begun to examine individuals and organizations that purposefully combine social and economic outcomes. In Hybrid Ventures, leading researchers examine individuals and organizations that simultaneously attempt to pursue such bended value outcomes. Various perspectives on hybrid ventures are explored in this volume, including: the costs to all when some entrepreneurs do not pursue hybrid approaches, whether hybrid ventures are – or should be – the new norm, and whether the social, environmental, and economic value are distinct and should be separated from each other. This volume contains both theoretical and empirical approaches to hybrid venturing from an international group of researchers. Specific topics include: the emergence of Certified B Corporations, different hybrid business models, the role of impact investing, indigenous entrepreneurship, hybrid ventures as "agents of change," and more. 

For nearly two decades, the Advances in Entrepreneurship, Firm Emergence and Growth series has provided an annual examination of the major current research, efforts in the field of entrepreneurship and Hybrid Ventures: Perspectives & Approaches to Blended Value Entrepreneurship continue in that tradition. This volume provides state-of-the-art research that helps set the foundation for inquiries into important research for the next decade and beyond.

CHAPTER 1

STANDING OUT AND FITTING IN: CHARTING THE EMERGENCE OF CERTIFIED B CORPORATIONS BY INDUSTRY AND REGION

Ke Cao, Joel Gehman, and Matthew G. Grimes

ABSTRACT

To fulfill their economic and social missions, it is imperative yet challenging for hybrid ventures to demonstrate legitimacy (fitting in) while simultaneously projecting distinctiveness (standing out). One important means for doing so is by adopting and promoting the recent B Corporation certification. Drawing on a comprehensive analysis of the emergence of this certification, we argue that when it comes to promoting their businesses, hybrid ventures should not adopt a one size fits all approach. Rather, their promotion strategies need to be adapted to their specific contexts. We theorize and develop a typology of certification promotion strategies for hybrid ventures based on the relative prevalence of other hybrid ventures in the same regions and industries. We conclude by articulating why the B Corporation movement is a rich and underexplored context for scholarship on hybrid ventures, and highlight several promising future research directions.

Keywords: Social entrepreneurship; hybrid organizations; certifications; B Corporations; legitimacy; optimal distinctiveness

How do entrepreneurial ventures address the challenges of “standing out” and “fitting in”? All organizations face these demands, but they can be even more acute in the case of hybrid ventures committed to pursuing multiple bottom lines. On the one hand, hybrid ventures need to stand out to convince stakeholders of their distinctiveness (Deephouse, 1999; Jennings, Jennings, & Greenwood, 2009; Navis & Glynn, 2011; Zhao, Fisher, Lounsbury, & Miller, 2017). Here, the problem is one of signaling how an organization differs from available alternatives in ways that have the potential to create value in the marketplace. For instance, a number of organizations that espouse the label of “social entrepreneurship” engage in various philanthropic activities (e.g., donating a pair of shoes to people in developing economies for every pair of shoes sold in developed economies; see Boss, 2013; Marquis & Park, 2014). Yet similar acts of corporate philanthropy have long been a staple for many large organizations (Galaskiewicz, 1991; Galaskiewicz & Burt, 1991; Marquis & Lee, 2013; Tilcsik & Marquis, 2013), setting up a potential challenge to claims of uniqueness. On the other hand, hybrid ventures need to convince stakeholders of their legitimacy (Cornelissen & Clarke, 2010; Deephouse & Suchman, 2008; Lounsbury & Glynn, 2001). Here, the problem is one of demonstrating how an organization conforms to prevailing cultural norms. For instance, for-profit organizations that benefit financially by way of addressing social and environmental problems are susceptible to criticisms, such as greenwashing or hypocrisy (Brunsson, 1989; Carlos & Lewis, 2017; Lyon & Montgomery, 2015; Marquis, Toffel, & Zhou, 2016) based on the traditional assumption that such practices are incommensurate with profit motives.

One recent effort to help social entrepreneurs simultaneously stand out and fit in is the B Corporation movement, which consists of a firm-level certification standard, a state-level legislative template authorizing a new legal form of organization, a market-level investment rating system, and consumer outreach through brand building and storytelling. First introduced in 2006, prospective B Corporations undergo a certification process and amend their corporate charters to stipulate their commitment to providing social and environmental benefits. By the end of 2016, 1,789 businesses from 54 countries were certified, providing these organizations with a potential “stamp of approval” and signaling their sustainability commitments to stakeholders (Bell, Taylor, & Thorpe, 2002; Delmas & Grant, 2014; Rao, 1994).¹ Of these, approximately half (n = 945) were based in the United States.

Despite the growing popularity of the B Corporation certification, this growth remains uneven across industries and regions. In this chapter, we describe the emergence of the B Corporation certification, attending to its industrial and regional adoption throughout the United States. We conclude by offering a framework for B Corporation leaders in particular, and hybrid ventures more generally, to assess various strategies for promoting their distinctiveness while also demonstrating their legitimacy.

B LAB: A FOURFOLD MOVEMENT

B Lab Company is a U.S. 501(c)(3) nonprofit organization that “serves a global movement of people using business as a force for good” (B Lab, 2015). As of February 2017, B Lab was headquartered in Berwyn, Pennsylvania (a suburb of Philadelphia), with additional offices in New York, San Francisco, and Denver. Its strategy is to drive systemic change through four interrelated initiatives: (a) building a community of Certified B Corporations; (b) promoting legislation creating a new corporate form that meets higher standards of purpose, accountability, and transparency; (c) accelerating the growth of “impact investing” through the use of B Lab’s impact investment rating system; and (d) galvanizing support for the movement by sharing the stories of Certified B Corporations (B Lab, 2015). In short, B Lab’s strategy directly targets the three dominant modes of governance: firms, markets, and institutions (Commons, 1931; Ouchi, 1980).

Background

B Lab was officially formed on July 5, 2006, an event dubbed “Interdependence Day” (see Table 1 for a list of milestones; B Lab, 2013b). Its founders, Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy, originally met as Stanford University undergraduates in the late 1980s. Prior to B Lab, Coen Gilbert and Houlahan spent more than a decade together at AND1, a basketball and apparel company.² Like most companies in its industry, AND1 manufactured its products in China. However, it took the extra step of having a monitoring group certify that its outsourced employees earned a living wage and worked in a safe environment. It also gave 10% of its profits to local charities, especially those committed to urban education initiatives. In 2000, the company became “the number two basketball shoe brand,” but also found itself in “a brutal gross-margin battle with Nike” (Knowledge@Wharton, 2012). Ultimately, AND1 was acquired in 2005 by American Sporting Goods, a private footwear company based in Anaheim, California. According to Houlahan, within 6 weeks of the sale AND1’s commitments to employees, the environment, and the community were completely dismantled.

Table 1. Selected B Lab Milestones.

Date	Event
July 5, 2006	The first official day of work at B Lab, known as “Interdependence Day.”
September 2006	The first version of the B Impact Assessment was created.
June 2007	The initial 19 Certified B Corporations were announced.
July 2007	Inc. published the first feature story on B Corporations.
September 2007	B Lab formed the Standards Advisory Council, an independent committee responsible for overseeing the B Impact Ratings System.
October 2007	The phrase “impact investing” was born at a Rockefeller Foundation sponsored event in Italy.
December 2007	King Arthur Flour was credited as the first to use the Certified B Corporation logo on a product (10 million bags of flour).
February 2008	B Lab raised its first outside funding: $500,000 from the Rockefeller Foundation.
September 2008	A group of 50+ “B Corp champions” convened at a retreat in California.
February 2009	The Rockefeller Foundation, Acumen, and B Lab jointly launched the ...

Table of contents

• Contents
• Introduction to the Volume on Hybrid Organizations
• Chapter 1 Standing Out and Fitting In: Charting the Emergence of Certified B Corporations By Industry and Region
• Chapter 2 Purposes, Priorities, and Accountability Under Social Business Structures: Resolving Ambiguities and Enhancing Adoption
• Chapter 3 Challenges of Hybridizing Innovation: Exploring Structural Attractors as Constraints
• Chapter 4 Indigenous Entrepreneurship and Hybrid Ventures
• Chapter 5 Hybrid Social Enterprise Business Model Synergy: Creation of a Measure
• Chapter 6 Consumer Entrepreneurship: What Is It? When, How, and Why Does It Emerge?
• Chapter 7 Agents of Change? An Inter-Organizational Research Agenda on Hybrid New Ventures
• Index