Social enterprises in Sub-Saharan Africa : the effects of institutional logics on the partnership process in developing countries

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Social Enterprises in Sub-Saharan Africa:

The Effects of Institutional Logics on the Partnership

Process in Developing Countries

Nina Jasmin Welt

10530207

Final Thesis

26

th

January 2018

MSc Business Administration

International Management Track

Supervisor: Dr. Francesca Ciulli

Second Reader: Dr. Ilir Haxhi

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Statement of originality

This document is written by Student Nina Jasmin Welt who

declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is

original and that no sources other than those mentioned in the text

and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for

the supervision of completion of the work, not for the contents.

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4. Results 31 4.1. Within-Case Analysis 32 4.1.1. Waka Waka 32 4.1.1.1. Partnership Portfolio 32 4.1.1.2. Business Partnerships 33 4.1.1.3. Charity Partnerships 35 4.1.2. Healthy Entrepreneurs 38 4.1.2.1. Partnership Portfolio 38 4.1.2.2. Charity Partnerships 39 4.1.3. Koneksie 42 4.1.3.1. Partnership Portfolio 42 4.1.3.2. Business Partnerships 42 4.1.3.3. Charity Partnerships 44

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4.1.4. ClosingTheLoop 46

4.1.4.1. Partnership Portfolio 46

4.1.4.2. Business Partnerships 46

4.2. Cross-Case Analysis 48

4.2.1. Partnership Selection Stage 49

4.2.2. Partnership Design Stage 50

4.2.3. Partnership Institutionalization Stage 52

5. Discussion 53

5.1. Contribution for Theory 53

5.2. Limitations 54 5.3. Future Research 55 6. Conclusion 55 7. List of References 57 8. Appendix 62 8.1. Interview Questions 62 8.2. Interviews 65 8.2.1. Waka Waka 65 8.2.2. Healthy Entrepreneurs 67 8.2.3. Koneksie 69 8.2.4. ClosingTheLoop 71 List of Tables 1. Partnership Process 15

2. Cases and Selection Criteria 25

3. Interview question affiliation to working propositions 28

4. Themes, Sub-Themes and Coding Strategy 29

5. Partnership portfolio Waka Waka 32

6. Summary Waka Waka case 37

7. Partnership portfolio HE 38

8. Summary HE case 41

9. Partnership portfolio Koneksie 42

10. Summary Koneksie case 45

11. Partnership portfolio CTL 46

12. Summary CTL case 48

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4 Abstract

Social enterprises are a fairly new research object. Literature has discussed this new organizational form in connection to its internal tensions, caused by two institutional logics. These influence that the competing logics have within a social enterprise have been observed by various studies, but the external factors are lacking in research. The purpose of this thesis is to explore the influence of competing institutional logics on the partnership process of social enterprises from developed countries, that are active in developing countries. By means of a multiple-case design, the Business Development Managers of four Dutch social enterprises that are active in Sub-Saharan Africa (Waka Waka, Healthy Entrepreneurs, Koneksie and ClosingTheLoop) were interviewed to collect primary data on the partnership process. With this data, the hybridization strategy of selective coupling was explored in all three stages of the partnership process, to reveal the implications of competing logics on partnerships in the weak institutional framework of a developing country. The selective coupling strategy was present in all four cases. The cases differ in the importance that they give the institutional logics. While market hybrid types were more engaged with the social logic, bridging hybrids had a stronger connection to commercial partners.

Keywords: social enterprise, partnership process, institutional logics, selective coupling, market hybrid, bridging hybrid.

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5 1. Introduction

In business a rising trend for social responsibility can be observed. More and more entrepreneurs are going against the grain by starting up businesses for the greater good of society (Skoll World Forum, 2013). Bridging social activism with capitalism emerges as a new organizational form that favors social value but at the same time creates economic value – the social enterprise (Battalina and Lee, 2014; Santos et al., 2015). A social enterprise

“encompasses the activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing

existing organizations in an innovative manner” (Zahra et al., 2009: 519). There are certain

types of social enterprises, categorized by social mission and client base. Commonly, social enterprises try to address the bottom of pyramid, directly or indirectly (Santos et al., 2015). To pursue a social mission, the social enterprise incorporates two institutional logics, rather than one as is the case with traditional business. This engenders tensions into the organization, internally as well as externally. However, research to date has mostly been concerned with the internal tensions of competing institutional logics (Battalina and Dorado, 2010; Dacin et al., 2011; Tracey et al., 2011; Pache and Santos, 2013; Battalina and Lee, 2014; Santos et al., 2015). Therefore, this thesis will focus on external operations and in particular the partnership process.

The importance of partnerships for social enterprises is well established in literature, describing many benefits regarding shared knowledge, risk, reduced capital needs, to name a few (Crouse, 1991; Sakarya et al., 2012; Yunus et al., 2010; Gray and Stites, 2013; Hockerts, 2015). Therefore, it appears to be a pressing issue to research how competing logics influence the process of forming and implementing partnerships. Especially in an international context, partnerships are necessary to share knowledge and risk regarding the foreign country. As social enterprises commonly address the bottom of pyramid, it is interesting to take a closer

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6 look at social enterprises from developed countries, that are active in developing countries. This thesis will focus on Sub-Saharan Africa, a part of the African continent where many developing countries are positioned. Developing countries experience issues with the basic human needs of health, safety, electricity and supply of clean water (Alesina et al., 1996; Tushabomwe-Kazooba, 2006; Bowen and Mureithi, 2009; Gready, 2010; Blattman et al., 2013; Mbangu, 2013; Rugerinyange, 2016). To address these issues, social enterprises need to form alliances and partnerships (Battalina et al., 2009; Fogel et al., 2006). This is particularly important for social enterprises from developed countries that pursue a social mission in developing countries, as they are global from inception. While there is literature in relation to social entrepreneurs and the networks they employ (Birley, 1986; Greve and Salaff, 2003; Newbert et al., 2014), research focusing on the networks that social enterprises build to address their competing institutional logics is rather limited.

This thesis attempts to extend the field of research regarding the partnership formation by social enterprises facing challenges in developing countries through concentrating on the partnership process of social enterprises, the influence of the social and commercial logics on this process and the influence that a weak institutional environment has on both partnerships and competing logics. The question that this thesis will research is: How do the social and

commercial logics that are inherent in social enterprises from a developed country inform the

implementations of partnerships in the context of developing countries in Sub-Saharan

Africa? This research will be conducted by means of a multiple-case design, to collect

qualitative, primary data from Dutch social enterprises that are active in Sub-Saharan Africa and face challenges caused by the domestic environments in developing countries.

With this research, knowledge regarding the network building of social entrepreneurs and the influence that social and market logics have on this process will be collected and give insights into the tensions between those actors and the issues they face when engaging with

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7 institutional frameworks of developing countries. This paper will help understanding how social entrepreneurs manage their networks in order to be a competitive actor on the market and simultaneously pursue their social mission.

Firstly, this paper will introduce the different streams of research that are coming together in this field and discuss the key papers and ideas. On this fundament will be footed the research question and six working propositions. A methodology distilling the case study as ideal method for this research will follow, together with an explanation for the choice of cases. Then the main results that came out of the data collection will be analyzed. The discussion will place the analyzed data into broader context with the literature in this field of research and discuss its contributions and limitations. Finally, a conclusion will illustrate the answer to the research question, recap and discuss the contributions of this case study.

2. Literature Review

2.1. Social Enterprises and their Logics

This section defines social enterprises and illustrate the different types of social enterprises identified by the literature. Furthermore, this section dives into the tensions and challenges that derive from the different institutional logics inherent in a hybrid organization, offering an overview of the characteristics of the logics that are at play within social enterprises. Finally this section reviews the strategies social enterprises may adopt to cope with the tensions between institutional logics.

2.1.1. Definition of the Social Enterprise

In social enterprise literature, there is wide agreement on the fact that the sustainability of organizations is necessary for the transformation of society towards a sustainable development. But to stimulate this transformation of organizations, the current approaches of corporate social responsibility as well as process and product innovation are insufficient

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8 (Schaltegger et al., 2016b). Schaltegger et al. (2016b) argue that social entrepreneurship can be a way to increase sustainable development. A social enterprise “encompasses the activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner” (Zahra et al., 2009: 519). This definition is inspired in part by Mair and Martí (2006), who emphasize that social entrepreneurship is not a monolithic concept. They describe it as a process that can recombine resources and create (social) value, stimulate social change and this not only through the offering of products or services but also the creation of new organizations. Thus, what makes social enterprises different from traditional businesses is that they do not strive to increase value for shareholders and owners. Rather, social enterprises prioritize the creation of value for their beneficiaries (Santos et al., 2015). Yet, they are also not a charity, because they employ business mechanisms to pursue their social/environmental goals and be financially self-sufficient. They are an important organizational form since they transform societal problems into business opportunities and improve the society they are active in (Roome and Louche, 2016; Schaltegger et al., 2016b).

2.1.2. Types of Social Enterprises

Santos et al. (2015) identify four types of social enterprises depending on the role their beneficiaries play within the business model and on the type of value spillovers produced by it. More specifically, they make a distinction between clients of their commercial activities and beneficiaries of their social/environmental mission and between automatic or contingent value spillovers. Based on these dimensions they identify four types of social enterprises: “Market Hybrid, Blending Hybrid, Bridging Hybrid, and Coupling Hybrid” (Santos et al., 2015:39). For example, Koneksie can be defined as a bridging hybrid. By selling safe motorbikes produced mainly in Kenya for Kenyan customers of the middle- to upper class, Koneksie benefits the Kenyan society by providing jobs with preferable working conditions

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9 and fair salaries. Therefore, while the clients are the customers purchasing the motorbikes, the beneficiaries are the workers, for which Koneksie creates social value by providing good salary and working conditions for the employees. The spillovers are automatic, rather than contingent because the income of the jobs benefits the workers immediately and therefore creates a positive impact for them. Bridging hybrids carry an intermediate risk of mission drift “due to the danger of prioritizing the needs of the commercial clients over beneficiaries” (Santos et al., 2015:48). Higher risk of mission drift can be found in the blending (clients are beneficiaries but value spillovers are contingent) and the coupling hybrid (clients are not beneficiaries and value spillovers are contingent). The least risky hybrid organization would be the market hybrid; a form of hybrid organization where clients are beneficiaries and value spillovers are automatic. Given its core features, the market hybrid is oftentimes employed for initiatives to reach the bottom of the pyramid with products and services that create social value for it. The bottom of the pyramid (BOP) describes a large, untapped market of the four billion people, who live on two dollars per day or less. The BOP offers potential for an organized, private sector market (Prahalad, 2012). Social enterprises can tap into this market to create automatic value spillovers, either directly as market hybrid or indirectly as bridging hybrid.

2.1.3. Competing Logics within Social Enterprises

The importance of social goals for the social enterprise is thus a drift in the meaning of value in comparison to traditional businesses, which focus on financial value. This means that social enterprises engage in commercial activities with the purpose to have a social impact and accomplish a social mission. This introduces friction into the operations of social enterprises: “…they walk a fine line between the institutional spheres of the business and charity sectors… [S]ocial enterprises should experience unique external and internal tensions due to this unusual positioning” (Battalina and Lee, 2014:409). The tensions described by Battilana

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10 and Lee (2014) refer to the institutional logics at play within the social enterprise. As explained by Thornton and Ocasio (1999:804), “institutional logics are both material and

symbolic—they provide the formal and informal rules of action, interaction, and

interpretation that guide and constrain decision makers…”. The institutional logics are thus

very influential and as Thornton and Ocasio (1999) go on explaining, in an organization they have a fundamental effect on identity building, authority structure, legitimacy, company mission, focus of attention, strategy, logics of investment and rules of succession. Organizations that do not function by one institutional logic, but combine logics in unprecedented ways can be defined as hybrid organizations. For instance, some hybrid organizations combine a banking logic with a development logic to form a microfinance organization that serves the poor (Battalina and Dorado, 2010). By combining the social and the commercial logic, social enterprises can be identified as one form of a hybrid organization.

Taking a closer look at the institutional logics within social enterprises, it can be observed that they combine the logics of social welfare and of the market/commerce (Pache and Santos, 2013). This thesis adopts the same characteristics of logics as described by Pache and Santos (2013:890): The goal of the social logic is to “make products and/or services available to address local social needs” and the goal of the commercial logic is to “sell goods and/or services on the market to generate economic surplus that can be legitimately appropriated by owners.”

2.1.4. Responses to Competing Logics

Whether or not social enterprises can sustain their existence as hybrid organizations depends on their commercial performance and the progress of their social mission and identity in all organizational practices (Santos et al., 2015; Zahra et al., 2009; Dacin et al., 2011). Dealing with different logics simultaneously however entails a multitude of challenges for a hybrid

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11 organization, especially since the logics are often not compatible. When incorporating parts of two logics, elements of one logic will often fall short. Also some hybrid organizations have to employ antagonistic practices that cannot be easily combined (Pache and Santos, 2013). Pache and Santos (2013) highlight four strategies that organizations use to cope with competing logics: decoupling, compromising, and selective coupling.

Earlier studies suggest that hybrid organizations tend to follow a strategy of decoupling; they endorse practices of one logic (often the social logic) only in a symbolic way, while actually employing the practices of another logic (often the market logic). This strategy is likely to fail in the long term, as it relies on the assumption that all organization members follow and protect the same logic and that external stakeholders are not able to perceive the misalignment between practices and policies of the organization. Another early stream of research exploring strategies for hybridization observes organizations compromising their logics. With this strategy, organizations try to compromise between logics by employing necessary elements of different logics rather than just one logic as a whole. This way the organizations will try to sustain their legitimacy in the eyes of all stakeholders. However, compromising often fails in contexts where the logics adhere to competing goals. Moreover, hybrid organizations employing this strategy can lose the support of stakeholders that require dedication to one specific logic. A more recent stream of research focuses on combining competing logics by employing a selection of activities from each logic (Pache and Santos, 2013).

Combining competing logics is described as a way to embrace multiple institutional logics by picking from a wider range of activities prescribed by the particular competing logics. Research proposes that social enterprises could “reconcile competing logics by enacting a combination of activities drawn from each logic in an attempt to secure endorsement from a wide range of field-level actors” (Pache and Santos, 2013:975). With

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12 their research on how hybrid organizations manage competing logics internally, Pache and Santos establish selective coupling as a third hybridization strategy; “an alternative strategy that [involves] the selective coupling of intact demands drawn from each logic” (2013:986). With the selective coupling strategy, a hybrid organization can enact two logics and choose the one that will better suit a certain goal. If a social enterprise wants to collaborate with a charity for example, it can enact activities from the social logic. On the other hand, if a social enterprise wants to collaborate with a business, it can then choose to enact activities that are drawn from the commercial logic. This way, a social enterprise can gain legitimacy both with charities as well as businesses (Pache and Santos, 2013)

Strategies to deal with tensions between logics have been studied in context with scaling a social enterprise, its hiring process or other intra-organizational practices (Tracey et al., 2011; Battalina and Dorado, 2010, Pache and Santos, 2013). However, research regarding the influence of competing logics on the external process of forming and implementing partnerships by social enterprises is lacking. Therefore this thesis explores the adoption of the three hybridization strategies presented previously in the context of partnership formation and implementation.

2.2. Partnerships and Collaborations

This section discusses the importance of collaborations and partnerships for social enterprises. Further, this section introduces a model of the selection and implementation process of new partnerships by Seitanidi and Crane (2009). The word partnership is employed in the broadest sense of the word, including partnerships of all levels of contractual commitment as well as partnerships within and across all sectors (thus social enterprise <> charity; social enterprise <> government; social enterprise <> business; etc.).

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13 2.2.1. Social Enterprises and Partnerships

According to Maloni and Benton, a partnership can be defined as a relation between two independent actors, that serves the shared goal “to achieve specific objectives and benefits” (1997:420). As they go on explaining, a partnership is often “created to increase the financial and operational performance” (Maloni and Benton, 1997:420). This definition describes partnerships and their purpose in a traditional business sense. For social enterprises, partnerships include partners beyond traditional businesses, such as charities, civil society and governments (Gray and Stites, 2013). Multi-sector partnerships “are generally defined as initiatives where public-interest entities, private sector companies and/or civil society organizations enter into an alliance to achieve a common practical purpose, pool core competencies, and share risks, responsibilities, resources, costs and benefits” (Utting and Zammit, 2009:40). Building on this definition, Gray and Stites (2013) identify the concept of multi-sector collaborative partnerships. This concept includes collaborations as a form of partnership that involves all partners in decisions and actions, employs shared norms and rules, accepts trade-offs for producing joint gains and shared value, offers various competencies, and takes responsibility for the joint responsibilities and risks of the collaboration (Gray and Stites, 2013). While the terms collaboration and partnership are used interchangeably here, they refer to the definition of multi-sector collaborative partnerships.

For social enterprises partnerships are particularly important for a number of reasons. They help social enterprises to spread risk, allow access to an otherwise not accessible market, foster the sharing of knowledge and resources, help leveraging expertise and resources (Yunus et al., 2010), reduce capital needs, give access to networks, fill institutional voids and share social capital, to name only a few benefits (Crouse, 1991; Sakarya et al., 2012; Gray and Stites, 2013; Hockerts, 2015). A successful partnership requires both sides to bring unique strengths to the table and should not be employed as a means to conceal the

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14 weaknesses of an organization (Robert, 1992). To tap into a mutually beneficial collaboration, partnerships must be tailored to the needs of both parties (Crouse, 1991). The motivations for partnerships outlined by Gray and Stites (2013) can be categorized into three types:

legitimacy-, competency- and resource-, and society-oriented. More and more traditional

businesses decide to engage in partnerships and collaborations with social enterprises to pursue a shared mission (Sakarya et al., 2012). Sakarya et al. (2012) described some of the objectives of social enterprise-business partnerships (social alliances) as gaining access to “funds, human resources, organizational infrastructure and supplies, and knowledge, expertise and networks” (p. 1716). To further study partnerships in the framework of this thesis, the following section explores partnerships as processes in three stages.

2.2.2. Partnerships as Processes

Extant literature has presented different views of how to research the process of partnership formation and implementation. While some approaches regard either a prescriptive or descriptive perspective of the process, a common characteristic of the approaches seems to be a chronological order of evolution (Seitanidi and Crane, 2009). Seitanidi and Crane (2009) explain the whole partnership process as implementation, encompassing the stages of selection, design and institutionalization. Conceptualizing implementation this way allows to consider it as fundamental component of the continuous strategy process, instead of simply regarding it a result of strategy planning and design. According to Seitanidi and Crane (2009:11) the partnership selection stage entails deciding the associational form, assessing possible partner options, and assessing risk (internally among employees and externally among similar organizations as well as their risk assessment processes). The partnership design stage (Seitanidi and Crane, 2009:14) covers experimentation (contract design and agreeing on partnership objectives), adaption (of the contract, the objectives and program amendments), and operationalization (continuous stabilization of partnership content and

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15 processes by reporting, reviewing and structuring). The stage of partnership institutionalization (Seitanidi and Crane, 2009:17) consists of relationship mastering (crises situations, accepting differences and disagreements) and personal familiarization (developing personal familiarization and understanding). These three stages serve as a framework for this thesis to research the partnership implementation of social enterprises (see table 1 for an overview).

1. Stage: Partnership Selection ➢ Deciding the associational form ➢ Assessing possible partner options ➢ Assessing risk (internally and externally) 2. Stage: Partnership Design ➢ Experimentation (contract design and

agreeing on partnership objectives) ➢ Adaption (of contract, objectives and

program amendments)

➢ Operationalization (stabilization of partnership content and processes) 3. Stage: Partnership Institutionalization ➢ Relationship Mastering (crises situations,

differences, disagreements) ➢ Personal Familiarization (mutual

understanding) Table 1: Partnership Process (Seitanidi and Crane, 2009)

2.3. Institutional Context and Development

The social enterprises that have been studied in the framework of this thesis are international social enterprises, which have a developed country as home country but their beneficiaries are in developing countries. This means that these social enterprises are international from inception and have constant interactions with the institutional context of developing countries. This thesis explores at formation of partnerships and collaborations by social enterprises, within the institutional environment of East African countries, i.e. the Democratic Republic of Congo (DRC), Kenya, Rwanda and Uganda. The four countries have been identified as

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16 Monetary Fund (IMF, 2017). In this section a short exploration of institutional theory in connection to developing countries is followed by a discussion of the development of the four countries and the implications for social enterprises and partnerships.

According to North (1991), institutions are the rules of the game or, more formally, “humanly devised constraints that structure political, economic and social interaction” (1991:112). The rules of the game can influence social enterprises in various manners, especially in developing countries. Particularly in developing countries, strict rules are absent, which can lead to corruption. Transparency International indicated the corruption index for DRC, Uganda and Kenya between 21 and 26, which means that corruption is high in the countries. Only Rwanda came out with a slightly better score at 54, but can still be considered moderately corrupt (Transparency International, 2016). Other issues in relation to a weak institutional framework in developing countries are low standards of accountability and low protection of property (Fogel et al., 2006). This can further complicate operations of social enterprises in developing countries.

The weakness of the institutional framework and thus the lacking support for a smoothly working market, can be observed in many developing countries. Here markets are oftentimes problematic (McMillan, 2007). This challenges entrepreneurs and international business in general to put more efforts into strategic planning, than necessary in a well-functioning economy (Peng, 2002). This thesis explores the partnership process, informed by the institutional framework of a developing country and the constraints of social and market logics of social enterprises. In regions with little formal rules and therefore a weak institutional environment, business has to rely greatly on the informal constraints and thus relationships and networks can offer support. The specificities of the institutional frameworks the social enterprises are active in are outlined in the following section. The international business context that the social enterprises are active in, is highly diverse in the different

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17 countries. Looking into political developments can give a better insight into the business context, as politics have a strong influence on economic development as well as institutional development.

2.3.1. Political Uncertainty in Sub-Saharan Africa

The effects that the political domain has on economic development is tremendous. As the maker of policies and regulations, politicians can influence whether an institutional framework is weak or strong. It has thus a strong effect on economic growth and political instability will reduce growth (Alesina et al., 1996). This has an effect on social enterprises that are active within the weak institutional frameworks of Sub-Saharan Africa. In the following, the political uncertainty of Rwanda, DRC, Kenya and Uganda and its effects on social enterprises as well as their partnerships are being discussed.

Little research has been conducted on Rwandese development and culture prior to the genocide of 1994. The genocide highlighted the great issues of tribalization in the country with two big groups fighting one another (Hutu and Tutsi). This ongoing conflict has strong influences on the political landscape. The reigning party is the one that ended the genocide, the Rwandan Patriotic Front, and it has not changed since as opposing parties are not allowed. There is still strong ethnic discrimination, as the government is built up of Tutsi-people only. This conflict often results in the outbreak of violence. Economic stability of the country is low and the Rwandan Patriotic Front is largely dependent on international charities for donations (Gready, 2010; Rugerinyange, 2016). These circumstances pose challenges for social enterprises not only regarding their legitimacy and economic sustainability, but also their personnel’s safety. Partnerships can help, not only leveraging a network in Rwanda, but also share knowledge regarding ways to work with an instable economic environment.

The Democratic Republic of Congo has not yet recovered from the war in the 1990s. The Congolese society is split by a conflict between ethnical groups and discrimination

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18 between people. This tribalization results in recurring violence and job opportunities are distributed within one group of people from the same ethnicity. Economic resources are not distributed equally and favor those in control of the political apparatus (Mbangu, 2013). These issues do not only impede the socio-economic development of the country, but also impose challenges on social enterprises active in this country. The situation might raise issues regarding partnerships with organizations run by different ethnic groups.

Similar to Rwanda and DRC, Kenya too has to cope with issues regarding conflict between ethnic groups. Often, especially around election times, violent outbreaks occur across the more rural areas. These outbreaks are extremely high in violence both from civilians and police and often result in numerous deaths and casualties. More than a thousand killings were caused by post-election violence each in 1991 and 2007 (Boone, 2011; Bennett et al., 2015). The most recent example of this electoral violence only occurred in 2017, when after the elections 24 protesters were killed by police (CNN, 2017). Not surprisingly, poor security was ranked one of the top three challenges for businesses in Kenya. Poor security was also ranked highly, considering crime in the country and the issue of having employees involved in criminal activity. For social enterprises this means that they will not only have to take security measures to protect their workers, they will also have to find measures to determine whether an employee is or could become a criminal (Bowen and Mureithi, 2009). Another challenge that social enterprises might face in Kenya is debt collection. Problems have been reported regarding the payment of goods and services, which resulted in many businesses not delivering on credit and/or for a down payment. Thus, social enterprises will have to consider alternative ways to collect debt or have an informed local partner handle debt collection. Lastly, “[i]nfrastructure as it relates to provision of access roads, adequate power, water, sewerage and telecommunication has been a major constraint” and power outages pose a great challenge for the smooth working of businesses (Bowen and Mureithi, 2009:17). Power

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19 outages can harm the work of social enterprises, especially when a continuous cooling chain is required for their products.

After two decades of war in Uganda from 1986 to 2006, large parts of the population were left impoverished, socially as well as economically. Charities were needed for support of the Ugandan people and basic needs (Blattman et al., 2013). An increased drive for privatization as well as Civil and Public service reforms of the early nineties led to a rising number of small business enterprises. From 1995 to 2002 the number of small enterprises more than doubled up to two million (Tushabomwe-Kazooba, 2006). Since 2006 the situation has been stable, up until riots started in 2011 against the government in power (Spiegel, 2011). Thus the situation for social enterprises is more stable in Uganda than it is in Kenya or DRC. Considering the rising number of small enterprises, there is the possibility of forming local partnerships. However, similar to Kenya, the power connection is not very well established in Uganda, which leads to power outages that can impede social enterprises in their work. Additionally, increased taxes as well as poor record keeping have been identified as strong impediments on economic growth (Tushabomwe-Kazooba, 2006). Poor record keeping could be an issue for social enterprises forming partnerships in Uganda, since poor record keeping could result in faulty accounting of financial investments. Increased taxes can complicate the financial accounting further as well as slow down the cash flow.

2.4. Theoretical Framework

This section combines the streams of research explained in the literature review and highlight the gap that this thesis aims to address and the research question that arises from the gap. Several arguments combining the research streams serve as a fundament for the working propositions (WP) that this thesis researches.

Social enterprises are a fairly new subject of research. They seek economic opportunities to improve social value (Zahra et al., 2009). To do this, social enterprises have

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20 to act according to two institutional logics, the social and the commercial logic. The two competing logics, can lead to friction internally and externally (Battalina and Lee, 2014; Santos et al., 2015). Some research has been conducted on how social enterprises and/or hybrid organizations balance competing institutional logics. However, their research aimed at exploring the strategies internally, through operational practices or human capital (Battalina and Dorado, 2010; Dacin et al., 2011; Tracey et al., 2011; Pache and Santos, 2013; Battalina and Lee, 2014; Santos et al., 2015). Pache and Santos (2013) explored the hybridization strategies that can be applied to address competing social and commercial logics. The hybridization strategies were explored by studying intra-organizational practices. Research on whether these strategies are applicable to external practices, such as the formation of partnerships and collaborations, is lacking. This, in spite of former research establishing that social enterprises also experience external tensions from competing logics (Battalina and Lee, 2014). To address this lack, this thesis explored literature regarding social enterprises and partnerships as external factor.

Much research is concerned with social enterprises engaging in partnerships to address societal issues (Sakarya et al., 2012; Gray and Stites, 2013; Hockerts, 2015; Birley, 1986; Greve and Salaff, 2003; Newbert et al., 2014). Partnerships can help to spread risk, give access to markets, or leverage expertise and resources, among a range of other benefits (Crouse, 1991; Sakarya et al., 2012; Gray and Stites, 2013; Hockerts, 2015). Motivations to engage in partnerships can be legitimacy-, resource- and competency-, or society-oriented (Gray and Stites, 2013). However, there is no literature regarding partnerships and competing institutional logics. Therefore, this thesis synthesized literature regarding competing logics and literature regarding the formation of partnerships. Research presents an array of partnership formation strategies. A prominent framework considers the implementation of

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21 partnerships as a process that entails the selection, design and institutionalization stage (Seitanidi and Crane, 2009).

Additionally, the perspective on the international business context that the social enterprises interact within is a contribution to literature. Since developing countries are in need of social wealth, social enterprises from developed countries often seek opportunities in those markets to solve societal issues. That makes them international social enterprises from inception. Developing countries have a weak institutional framework, often caused by political uncertainty after the wars of the recent past. The weak institutional frameworks impede economic growth in many countries in Sub-Saharan Africa (Alesina et al., 1996). Challenges for social enterprises in Rwanda, DRC, Kenya and Uganda are safety, health, legitimacy, trust and infrastructure, among others (Alesina et al., 1996; Tushabomwe-Kazooba, 2006; Bowen and Mureithi, 2009; Gready, 2010; Blattman et al., 2013; Mbangu, 2013; Rugerinyange, 2016). In connection with the study of the social and commercial logics in the partnership process of social enterprises, the influence of the complex institutional framework of Sub-Saharan developing countries can be studied. Therefore the research question of this thesis is: How do the social and commercial logics that are inherent in social

enterprises from a developed country inform the implementations of partnerships in the

context of developing countries in Sub-Saharan Africa?

2.4.1. Working Propositions

To answer this research question, the use of the social and commercial logics was explored in every step of the partnership formation and implementation process, starting with the partnership selection, where a social enterprise explores possible partner options and assesses internal and external risk (Seitanidi and Crane, 2009). As discussed earlier, social enterprises are likely to use partnerships to reduce risk and as a source of knowledge, financial and social capital when interacting in the market of a developing country. Because of the complexity

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22 inherent in having to deal with the two logics, social enterprises can be expected to favor one of the logics in the selection of a partner (Yunus et al., 2010; Battalina & Dorado, 2010). This means that the social enterprise might choose a charity or traditional business as partner, rather than a hybrid organization, since a hybrid organization deals with competing logics itself, which engenders further complexity. In combination with the weak institutional context of the developing countries, the social enterprise is expected to resort to charity or business partners. In order to avoid an amplification of the institutional complexity already faced by the environment, social enterprises are expected to select partners which act according to one main logic, either the commercial or the social one. For example, Pache and Santos (2013) found that hybrid organizations that derive from a commercial background engage more with social demands to overcome legitimacy issues; this is an example of the selective coupling strategy observed by the authors. However, as the social enterprise aims to keep the balance between the logics, it is likely to choose multiple partners to address its two main logics: this means that it is likely to select one or more partners that act (mainly) according to the commercial logic and/or more partners that operate (mainly) in keeping with the social logic. Thus it stands to reason, that the social enterprises entering a developing country adopt a selective coupling strategy in the partner selection. Based on this assumption are the following two working propositions, focusing on the partnership selection stage:

1 a. Social enterprises are likely to select partners which act according to one main logic,

either the commercial logic or the social logic, in the face of a weak institutional framework.

1 b. Social enterprises are likely to build a partnership portfolio of different partners, each

one embedded in one main logic, in line with a selective coupling strategy.

In the partnership design stage, social enterprises experiment, adapt, and operationalize a partnership. In this stage contracts are negotiated and partnership objectives are established (Seitanidi and Crane, 2009). During this process, a logic can be

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23 compartmentalized into its specific activities. Partners can thus choose from a range of activities from either the social or commercial logic, rather than only committing to one logic with one partner. The social enterprise is expected to emphasize specific activities of a logic rather than the logic as a whole (Pache and Santos, 2013). It stands to reason that also in the partnership design stage, social enterprises will engage in adopting a selective coupling strategy. As stated by Pache and Santos (2013), a selective coupling strategy is easier to implement than a compromising strategy, because it keeps the social enterprise from engaging in exhausting negotiations and it does not require actors “to come up with alternative ways of doing things” (994). This means that the partnership is designed so that the partners can engage in practices which are in keeping with their main, existing logic, being it commercial or social. Seitanidi and Crane (2009) include stabilization as part of the partnership design stage, this is especially relevant in the context of developing countries. The social enterprise, due to its hybrid nature, will be in charge, on one side, of protecting the partnership from mission drift (Yunus et al., 2010) and, on the other side of ensuring the achievement of the commercial goals. Due to this complexity, the social enterprise is likely to selectively couple activities that are in line with the partners’ internal logic, in order to avoid friction.

2 a. Social enterprises are likely to adopt a selective coupling strategy in the design stage, so

that each partner engages in practices which are consistent with their main, existing logic.

2 b. Social enterprises are likely to adopt a selective coupling strategy in the design stage in

order to build stable partnerships, in order to cope with issues caused by an instable

institutional framework.

The partnership institutionalization phase is characterized by the mastering of the relationship in situation of crises, difference and disagreements, as well as the building of a mutual understanding through personal familiarization (Seitanidi and Crane, 2009). In this stage, two components can lead strategy in different directions: whether the partnership faces

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24 difficult situations and crises or not. Considering the institutional framework of developing countries, it is likely that the social enterprise will encounter disagreements, regarding accounting or corruption for example. It stands to reason that, when disagreements and conflicts prevail, social enterprises and their partners will address them by compromising: the partners will strengthen their focus on practices and goals related to their main logic while neglecting the other logic. However, disagreements are likely to diminish with the ongoing familiarization with the partner. It can be argued that this familiarization process will consist of a shift from selectively coupling activities from one logic towards selectively coupling activities from both the social and commercial logic within one partnership. Indeed, the interaction between the social enterprise and its partners will lead the partners to increase their understanding of the logic which play a marginal role in their organization. This will the social enterprise to foster the adoption, by their partners, of activities which combine the commercial and the social logic.

3 a. If the partnership encounters conflicts and disagreements, the social enterprise and its

partners are likely to resort to selectively coupling activities from a single logic.

3 b. The familiarization with the partner is likely to allow social enterprises to foster the

adoption, by their partners, of activities which combine the commercial and the social logic.

3. Methodology

3.1. Research Design

The research domain around social enterprises is fairly young and there is especially little research to be found regarding their partnership process. If a study aims to analyze a new phenomenon, a qualitative approach is recommended (Saunders & Lewis, 2014). Within the qualitative realms, this thesis was conducted by means of a case study, which is defined as “an empirical inquiry that: investigates a contemporary phenomenon in depth and within its

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25 real-life context, especially when the boundaries between phenomenon and context are not clearly evident” (Yin, 2009:18). Therefore, a case study is relevant especially for research questions concerned with the “how” or “why” of a phenomenon. In addition, a case study is an appropriate method if the study is focused on contemporary events (Yin, 2009). It is thus the preferred method for this thesis, that aims at explaining the influence of social and commercial logics on partnerships by social enterprises in the context of the African market. A multiple-case design was chosen for this study for a set of reasons. A multiple-case design allows for comparisons among the cases and thus results can be considered more robust (Yin, 2009). Even more so, cross-case analysis enables the identification of patterns among cases (Eisenhardt, 1989). Additionally, a multiple-case design was chosen to enable literal replication (Yin, 2009). For this reason, the cases selected for this research have similar core features, which supports the reliability of discovered patterns. The selected cases are four social enterprises, from the Netherlands, that are pursuing a social mission in African developing countries. All those social enterprises provide products or services to ensure the basic needs of safety, light, health, and employment. In particular, this study examined their collaborations and partnerships, that are necessary to be economically sustainable and/or pursue their social mission in the foreign market. While there are arguments against case studies, they are an appropriate tool particularly in newer fields of research, as a greater number of case studies with matching results can uncover the patterns behind a phenomenon (Yin, 2013). Unfortunately, case studies have also been viewed as a less desirable method, with the main concern being a lack of rigor (Yin, 2009). Therefore, this study followed explicit and formal procedures to embark on a rigorous methodological path.

3.2. Case Selection

The four social enterprises (Koneksie, Waka Waka, Healthy Entrepreneurs, and ClosingTheLoop; see table 2) have been selected based on certain criteria, which are:

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26 identification as social enterprise, country of origin (EU), active in Central- and East-Africa, social mission focused on satisfying the BOP’s core needs, and working experience of at least four years. These criteria have been chosen because, as explained in the literature review, many social enterprises are international from inception, in particular the market hybrid type (Santos et al., 2015). This type of social enterprise focuses on initiatives for access to basic needs. Also the bridging hybrid is relevant in this context, given its automatic value spillovers (Santos et al., 2015). Focusing on these two types of social enterprises is a prerequisite for literal replication in this study, as both types are producing automatic value spillovers to the BOP. Additionally, BOP initiatives are crucial in developing countries such as Rwanda, Uganda, Kenya and DRC. The particular complexity of the Central- and East-African market requires social enterprises to engage in partnerships more than in developed markets, which in turn results in more interesting cases to study for this research.

The cases are chosen from a list of Dutch social enterprises with social purposes in Africa sourced from the Social Enterprise NL foundation. Koneksie was established in 2012 to develop safer motorbikes for taxi services in Kenya. They develop motors, equipment, and infrastructure for the taxi service to improve the safety on the streets, as well as microfinancing programs to make the procurement of their products feasible. The goal of the company is to decrease the number of deadly traffic accidents by 50 % in 2020. Waka Waka was established in 2012 to supply people in developing countries with light and electricity. They can thus be considered a market hybrid (Santos et al., 2015). They develop solar lamps and chargers based on a ‘high-tech low-cost’ principle and offer microfinancing programs for people to afford their products. They also give away a free light to the poorest of the poor for every light they sell. Healthy Entrepreneurs (HE) was established in 2011 to supply remote villages in Africa with basic healthcare and medicine. They set up a supply chain from the manufacturer to the final customer by implementing a micro-franchise. HE has entrepreneurs

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27 in various villages supplying people with medicine and medical information, as well as a few health kiosks in Congo. ClosingTheLoop (CTL) was established in 2014 to reduce waste and recycle valuable materials. They collect old phones in developing countries mainly from business partners in and deliver them to plants where the phones will be recycled. While the BOP are not CTLs clients, they are still its beneficiaries, as the social enterprise creates employment opportunities for them and thus automatic value spillovers. All these four social enterprises state on their websites that they have to rely on networks, collaborations or partnerships in one way or another, therefore they are ideal cases for this thesis.

Name Waka Waka Healthy

Entrepreneurs Koneksie / Kibo ClosingTheLoop Business

Development Manager

Merijn Havinga Bart van der

Vossen Mark Janssens Reinhardt Smit

Established 2012 2011 2012 2014

Home Country The Netherlands The Netherlands The Netherlands The Netherlands

Mission Light/electricity

for rural areas

Healthcare for rural areas Safe mobility, economic growth Waste reduction, safe employment

Product Solar lamps,

chargers, etc.

Medical training

and supplies Motorbikes

Clean environment

Clients BOP;

middle-class BOP

Middle-class;

BOP Businesses

Developing

Countries DRC, Rwanda DRC, Uganda Kenya Uganda, Rwanda Website

nl.waka-waka.com

healthyentre

preneurs.nl koneksie.com closingtheloop.eu Table 2: Cases and Selection Criteria

3.3. Data Collection

The data collection was focused on primary and secondary data gathered from the social enterprises. The collection of secondary data was the first step in the data collection. Secondary data was collected from the documentation publicly released by each social

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28 enterprises on their website. The main goal of the collection of secondary data was to identify the partnership portfolio of each social enterprise and to gain insights on the partnerships established, in order to then conduct a targeted collection of primary data.

The primary data was collected through semi-structured interviews. For each social enterprise one interview was conducted with the Business Development Manager, responsible for the African market, to gain information about networks, partnerships and collaboration each social enterprise had been developing. The interviews lasted for approximately one hour, were recorded as audio files with supporting notes and later transcribed. The interview questions were closely linked to the working proposition and aimed to uncover the use of the social and/or commercial logics by each social enterprise, during the process of choosing a partner, designing the partnership, and implementing the partnership (see interview questions in appendix 1). Every partnership was examined over the time frame from its initiation until its current state or up to its ending. Because of the strong relation to the theoretical framework and the relatively short interview time span of one hour, the interviews can be defined as focused interviews (Yin, 2009). As Yin (2009) describes, the set of questions of a focused interview, is derived from the working propositions and from the theory, to avoid bias and increase reliability. In the table below, the connection between interview questions and working propositions is recorded (see table 3).

Interview Questions Working Propositions 1 a 1 b 2 a 2 b 3 a 3 b 1 X 2 X X 3 X 4 X 5 X 6 X 7 X 8 X X 9 X X 10 X X

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29 11 X 12 X X 13 X X 14 X X 15 X X 16 X 17 X X 18 X 19 X 20 X 21 X 22 X

Table 3: Interview question affiliation to working propositions

3.4. Data Analysis

To make sense of the gathered information from the focused interviews, the collected data was analyzed through a thematic coding approach (Ryan and Bernard, 2003). Prior to the thematic coding, themes were identified, based on the literature review and further established through the working propositions. However, as Ryan and Bernard stated “[t]hemes come both from the data (an inductive approach) and from the investigator’s prior theoretical understanding of the phenomenon under study (an a priori approach)” (2003:88). Therefore this thesis followed an analyzing strategy both with an inductive and as well as deductive approach. Deductively identified themes belong to the following categories: (1) institutional logics, (2) hybridization strategies, and (3) partnership stages and were based on extant literature (see table 4). The inductive approach gave the opportunity to find patterns in interview data that could offer new insights and introduce new formerly undefined themes. For example, attention was assigned to whether the social enterprises adopted hybridization strategies which had not been, to date, identified by scholars.

Once the themes were deductively identified from the literature, the thematic coding took place. This consisted of identifying and classifying the relevant data, by associating them with the corresponding themes. The goal of this coding technique was to identify the logics

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30 and strategies adopted by the social enterprises at each stage of the partnership process in order to answer the research question. With the coded data, a case study database was created. This is an Excel sheet where the themes are grouped under their respective categories together with quotes from the interviews. A case study database does not only allow for a clear and structured presentation of the data, but also strengthens the reliability of a research (Yin, 2009).

Once the case study database was developed, a within-case analysis was conducted, followed by a cross-case analysis. In the within-case analysis, each case was analyzed separately and the working propositions were compared with the evidence from the cases in order to confirm or reject them. The internal validity of this research was increased by explanation building and by addressing rival explanations within the data analysis (Yin, 2009). Every within-case analysis was supported by a table to show the most important findings. A cross-case analysis was conducted in order to assess similarities and differences between cases (Ryan and Bernard, 2003). This is a suitable type of analysis for a multiple-case study, as multiple-cases can be compared to each other and the emerging results are likely to be more robust than single-case studies (Yin, 2009). To ensure high quality of analysis, Yin proposes four principles as guidance: attend to all evidence, address all major rival interpretations, address the most significant aspect of the case study, and use own prior, expert knowledge (2009:160). These principles guided the data analysis to keep with a high quality of the research design.

Theme Sub-Theme Coding Strategy

Institutional logics

Commercial logic “Sell goods and/or services on the market to generate economic surplus that can be legitimately appropriated by owners” (Pache and Santos, 2013:980).

Social logic “Make products and/or services available to address local social needs” (Pache and Santos, 2013:980).

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Strategies prescriptions in a slightly altered form, crafting an acceptable

balance between the conflicting the conflicting expectations of external constituents (Pache and Santos, 2013:975).

Decoupling “[O]rganizations symbolically endorse practices prescribed by one logic while actually implementing practices promoted by another logic” (Pache and Santos, 2013:974).

Selective Coupling

“[T]he purposeful

enactment of selected practices among a pool of competing alternatives” (Pache and Santos, 2013:994).

Partnership Strategies

Partner Selection Partner options (charity, business, government, etc.); risk assessment (Seitanidi and Crane, 2009)

Partnership Design

Objectives, contribution, commitment, amendment of partnership program (Seitanidi and Crane, 2009) Partnership

Institutionalization

Goals, type of engagement, contribution, commitment, disagreements/crises, stabilization (Seitanidi and Crane, 2009) Table 4: Themes, Sub-Themes and Coding Strategy

3.5. Quality of Research Design

Quality measures for the research design consider the construct validity, validity internally and externally, as well as reliability of the research. Often strengths and limitations of case studies are discussed in relation to their validity and reliability. Certain measures were taken in the framework of this thesis to change that. The construct validity was ensured by using multiple sources of evidence through the multiple cases and primary as well as secondary sources. Internally, validity was granted through explanation building and the addressing of rival explanations. Externally, the validity was granted through the aforementioned replication logic of multiple case studies. To ensure the reliability of this research, a case study database was developed (Yin, 2013).

4. Findings

This section elaborates on the findings from the data collection by conducting, first, a within-case analysis and then a cross-within-case analysis. The results are presented across the three stages

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32 of the partnership process. Each stage is analyzed based on the influence that the institutional logics took on the ongoing partnership process. Both in the within-case analysis and in the cross-case analysis the data were confronted with the working propositions, in order to verify whether the latter were confirmed or rejected.

4.1. Within-Case Analysis

All within-case analyses are structured by first introducing the portfolio of the social enterprises’ partnerships in two Sub-Saharan countries. The partnership portfolios are based on the interview data. Then the partnerships are discussed clustered into two categories: business and charity. At the end of each analysis, a table summarizes the most important outcomes including rejected (-) and confirmed (+) working propositions per case.

4.1.1. Waka Waka

4.1.1.1. Partnership Portfolio

For this case, an interview was conducted with Merijn Havinga, Business Development Manager of Waka Waka on 5th December 2017. Waka Waka has a large portfolio of partners (see table 5). During the partnership selection stage, Waka Waka reaches out to all types of partners and has formerly been approached by partners to engage in collaboration. The social enterprise mainly selects partners that enact one main logic, which offers stability in the context of the developing countries. This confirms working proposition 1 a. One exception is the partnership with commercial partner Brabanta in DRC, where practices from the social and commercial logics are selectively coupled. But the company itself is purely commercial.

Waka Waka collaborates with a bigger number of commercial partners than charities. Havinga (2017) explained, that the big numbers of commercial partners are connected to the necessity to be financially sustainable. Despite a majority of commercial partners, the portfolio shows some diversity, which suggests that Waka Waka is acting in line with a

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33 strategy of selective coupling, which confirms working proposition 1 b. For example, Waka Waka engaged in a partnership with the charity Care to reach the BOP: “[they] have the most wide spread network in the rural areas and because they have been active in the country for a long time already” (Havinga, 2017). On the other hand, Waka Waka engaged with commercial partners, like the African supermarket chain Narcomat, to pursue activities that are prescribed by a commercial logic: “[R]etail in general is a way to sell your products and get revenue, because in retail you sell and get paid very fast, so it’s good for cash flow” (Havinga, 2017). Rwanda displays a mix of local and international partners. However, Waka Waka did not partner with local organizations in DRC, which can be connected to the corruption index, which is twice as high in DRC than it is in Rwanda.

Name of Partner Type of Partner

Narcomat (Rwanda) Commercial

Heineken (Rwanda) Commercial

Farmers (Rwanda) Commercial

Food Producers (Rwanda) Commercial

Airtel (Rwanda) Commercial

NTN (Rwanda) Commercial

Care (Rwanda) Charity

Brabanta (DRC) Commercial

CordAID (DRC) Charity

Table 5: Partnership portfolio Waka Waka (Rwanda/DRC)

4.1.1.2. Business Partnerships

During the partnership design stage, Waka Waka employed a selective coupling strategy, so each commercial partner could engage in activities drawn from the commercial or social logic, which confirms working proposition 2 a. In Rwanda, a partnership with Narcomat was established in 2016. Narcomat is engaged in commercial practices by taking Waka Waka’s products to the market. Also Waka Waka is responsible for commercial practices related to marketing: “[W]e had sales teams going to the malls show our product to people and then

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34 referring them to Narcomat” (Havinga, 2017). In DRC, a partnership with Brabanta was established in December 2016. Brabanta is engaged in social activities, by purchasing Waka Waka’s products to supply them to employees on plants for palm oil production. “[M]ost companies in DRC are not engaged with the social impact, but they are. They are thinking about the environment and impact on local communities so our product really adds to their local impact” (Havinga, 2017). On the other hand, the activities that the social enterprise is responsible for reveal the commercial practices of supplying Brabanta with products and receiving financial compensation for it. Thus, for Waka Waka, Brabanta is a business partner, that helps the social enterprise to pursue commercial goals. Also this partnership is characterized by a strategy of selective coupling. During the design stage, there was no clear focus on building a stable partnership to cope with challenges of the developing countries, therefore working proposition 2 b is rejected for commercial partnerships. However, the influence of the developing country context was visible in the time it took Waka Waka to come to mutual understandings of partnership agreements. It took much time and effort to establish and adopt an agreement.

During the partnership institutionalization stage, Waka Waka did not experience disagreements or conflict with their partners Narcomat and Brabanta, therefore working proposition 3 a is not applicable for these partnerships. The familiarization with the Narcomat allowed for an improvement of the commercial activities in place, such as more prominent in-store product placement and stronger promotion of products, now performed by Narcomat and not by WakaWaka as was the case initially. Yet, the familiarization did not result in adding activities from a social logic to the partnership with Narcomat. However, there might be potential to give the partnership a social angle in the future, as Narcomat appreciates the impact of the social logic on sales. As Havinga (2017) explains, the supermarket realized that the social impact and the fact that Waka Waka is a social enterprise supports the marketing of

Social enterprises in Sub-Saharan Africa : the effects of institutional logics on the partnership process in developing countries