Managing the Tension between Social Logics and Business Logics: Insights from the Alternative Food System.

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Managing the Tension between Social Logics

and Business Logics:

Insights from the Alternative Food System.

Master’s Thesis

MSc International Business and Management

Gerdien Velink

S1891952

June, 2015.

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Details

Name: Gerdien Velink

Programme: MSc. International Business and Management Student number: S1891952

Email: g.velink@student.rug.nl

Supervisor: Dr. Miriam M. Wilhelm

Email: M.M.Wilhelm@rug.nl

Co-Assessor: Dr. Rudi de Vries

Email: R.W.de.Vries@rug.nl

University: University of Groningen

Faculty: Faculty of Economics and Business Netelbosje 2

9747 AE Groningen

List of Tables

All tables were produced by the author of this research.

Table 1: Overview of cases page 21

Table 2: Representative quotes derived from the interviews page 36 Table 3: Approaches chosen by the alternative food organisations page 37

List of Figures

All figures were produced by the author of this research.

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Abstract

Alternative food organisations are social enterprises, hybrid in nature, that deal with social logics and business logics. This hybridity creates an internal tension as the two logics are in conflict; incidents in both the internal and external environments can invoke these tensions, and in turn this can trigger a phase of organisational change. Moreover, alternative food actors show that in dealing with the tension, which slows down the execution of the social mission, they are able diversify between short and long term attainable social goals. Elements are added to the social mission in order to ensure that alternative food actors can successfully maximise social impact, even while experiencing tension. The tension between social and business logics is dynamic- managers in alternative food organisations thus need to take an active approach towards dealing with the tension, in order to ensure that the social mission of the organisation is not compromised and a new equilibrium between social and business logics is established.

Key words

alternative food organisation, food systems, social enterprise theory, hybrid organisations, tension, social enterprise logics, business logics, social mission.

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Introduction

Global food scandals, such as the horsemeat scandal and the scandal concerning Chinese baby milk powder, have raised awareness that the quality of food is no longer guaranteed or self-evident (Guardian, 2013). Lack of trust in the conventional system has driven the emergence of a counter-movement: an alternative food system with an increasingly transparent supply chain and an awareness of social and environmental impact (Marsden, Morgan & Murdoch, 2006)(Gereffi & Lee, 2009)(O’Hara & Stagl, 2001)(Feagan, 2007). Organisations active in the alternative food system have a social mission to re-establish the connection between producers and consumers, and to create a system that values close social, political and economic linkages (Roos, Terragni & Torjusen, 2007).

The social mission of alternative food actors conflicts with the internal presence of business logics, particular as these logics gain increasing prominence when the organisation aims to meet growing demand, increases production, deals with complications from the external environment or aims to finance new investments. Alternative food actors are classified as social enterprises, defined by Eversole, Barraket & Luke (2014) as organisations or firms who ‘combine characteristics of for-profit businesses with characteristics associated with community, or not-for-for-profit, organisations’. Alternative food actors have a social mission at their core: to introduce a counter-movement to, and raise public awareness of, practices within the current food system. This social mission, when confronted with the presence of business logics, creates a hybrid nature that results in internal duality as the social enterprise seeks to achieve its mission through a business operation (Smith, Gonin & Besharov, 2013). Internal tension arises, as the characteristics of the two logics are incompatible.

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become increasingly important, and this creates a risk of the alternative food actor becoming indistinguishable from the conventional actors the social enterprise was designed to oppose.

In order to avoid drift from the social mission, alternative food actors need to find a way to manage the tension that arises between the social and business logics. Managers leading the alternative food organisation need very specific competences, such as a flexible approach to bridging the gap between the competing logics, and the ability to identify, manage and resolve the tension as it arises. The ability of managers to identify the tension quickly is important, as it determines the approach that these organisations take to manage the problems that can arise from an increasing need for hybridity. Failure to perceive the tension can reduce the impact and effectiveness of the social mission as well as posing a threat to the alternative actor’s very justification for existing.

This research builds on earlier works by Pache & Santos (2013), Doherty, Haugh & Lyon (2014) Battilana & Dorado (2010), Mason & Doherty (2014) and others, all of whom examined the ways in which organisations can manage the competing internal logics they are facing. The literature suggest that tension arises on all levels of the organisation, particularly during times of organisational change or restructuring (Jarzabkowski, Lê & van der Ven, 2014). The existing literature suggests several approaches that managers could take in order to manage the tension that arises from the need to develop into a hybrid organisation.

To-date very little research has been undertaken regarding how the applicability of these approaches can differ during the different phases of organisational change, how social enterprises can seek to deal with the competing logics without compromising growth, and also regarding whether the tension is static or dynamic over time. By applying the case of alternative food systems to existing literature regarding tensions with social enterprises, the aim of this study is to provide further insight into the effect that the tension from social and business logics has on the operations of social enterprises. The alternative food system is an emerging and dynamic field, and as a result actors can be expected to face tension to a great extent as increased popularity drives the need for organisational growth.

Research Question

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The objective of this research is to contribute to the literature that already exists regarding the conflicting relationship between social enterprise and business logics, and also the tensions that arise out of that conflict. By studying the working of the alternative food system, more insight is given regarding the operations of social enterprises as hybrid organisations. An exploratory approach utilising qualitative case studies is performed to explore the different ways in which the alternative food actor deals with the tension.

Structure of the research

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Literature Review

The dysfunctional conventional food system

As a result of globalisation the food system as we know it, the conventional food system, has become highly complex, interdependent and opaque; the connection between the environment, producer and consumer has been lost (Cattaneo, Gereffi & Staritz, 2010)(Koc & Dahlber, 1999). Consumers are no longer aware where their food comes from and what it contains (Ruth-McSwain, 2012)(Mintel, 2015). A few, a total of ten, large global players control the conventional food chain and are responsible for over 40 percent of the total worldwide food production, and the market is becoming increasingly consolidated (Stones, 2012)(Oglethorpe & Heron, 2013). Due to growing vertical integration these firms have the power to press their supply chain for lower prices, thereby crowding out the smaller suppliers (Senauer & Venturini, 2005)(Econexus, 2013). A highly competitive market exists, focussed on low prices, where firms are competing with each other for a larger market share.

As global firms can easily switch suppliers or import products from abroad, firms are under continuous pressure. Farmers cannot cope with the losses that would be caused by a weak harvest and as a result they turn to chemicals to combat weeds and plant diseases, ignoring the negative side-effects including environmental pollution and possible health risks (Morgan & Murdoch, 2000). Farmers and other producers strive for maximised production and over-harvesting, mass-production and over-fishing all result from that imperative. In addition, a third of all food is becoming waste as it does not fulfil the strict selection criteria that conventional firms put on products. Farming is becoming more and more focused on the economies of scale; farmers lose the connection with their products and are increasingly relying on technology instead of natural agricultural practices, and as a result they are upsetting the natural balance of the ecosystem (Oglethorpe & Heron, 2013)(Morgan & Murdoch, 2000).

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and environmental problems, negative externalities are to a great extent accepted by actors within the system and consumers are becoming more aware that their affordable food comes at a high cost in other ways (Nousiainen et al., 2009).

Emergence and development of an alternative food system

As a counter-movement to problems of the conventional food system, alternative food initiatives have emerged. Dissatisfaction about the workings of the current system and growing concerns about consumers’ personal health and the environment have all contributed to consumers moving away from the industrial food provision towards a system that more closely represents their values (Feagan, 2007)(Gereffi & Lee, 2009)(Mintel, 2015).

“Alternative food system” is the collective term for several food initiatives including farmers markets, community supported agriculture (CSA) and the vegetable bags project, to name just a few examples (Feagan, 2007)(Halweil, 2002)(Brown & Miller, 2008). Each of these initiatives focuses on ‘good, clean and fair’ food (Ikerd, 2011). Several social purposes can be identified; most commonly the use of organic or local products.

Other alternative actors focus on social purposes such as building links between produce and local communities, educating people about good food, establishing a circular economy, improving health, facilitating social justice and fostering fair labour relations (Joassart-Marcelli & Bosco, 2014). Products from the alternative food system are associated with higher quality ass they are thought to be fresher and more sustainable, with less of an environmental impact (Bloom & Hinrichs, 2010)(Goodman, 2004). The alternative food system aims to restore those characteristics that are no longer guaranteed, or self-evident, in the globalized conventional food system (Marsden, Morgan & Murdoch, 2006).

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Businesses operating in the alternative food system can be classified as social enterprises or so-called hybrids: firms that have business characteristics but combine them with social characteristics (Eversole, Barraket & Luke, 2014)(Battilana & Lee, 2014). Hybrids are organisations that have a specific type of organisational structure that allows for the the coexistence of values from two or more different streams within itself (Doherty, Haugh & Lyon, 2014). A hybrid structure allows for great innovative potential but its dual nature can create tension between competing logics and if not managed correctly this can stifle much of that potential (Battilana et al. 2012).

Social enterprises are a specific form of hybrids, combining social and business streams in their internal structure. The organisations have a social mission, but simultaneously adhere to business logics to maintain the organisational structure (Dacin, Dacin & Martear, 2010). In addition, these business logics are what differentiate the social enterprise from a non-profit organisation or a charity; the social enterprise is dependent on commercially generated revenue (Ebrahim, Battilana & Mair, 2014). Incorporating business logics frees the organisation from being dependent on donations, and as a result the social enterprise has a far greater degree of autonomy in financing its operations (Battilana et al., 2012).

Social enterprises have grown in scale tremendously during the last few years, in part due to growing dissatisfaction with, and perceived ignorance of, the current systems. The economic crisis of 2008 triggered the emergence of social enterprises and heralded a move towards more ‘committed’ type of business, whether in the food, healthcare or retail sector (Sepulveda, 2014)(O’Hara & Stagl, 2001)(Doherty, Haugh & Lyon, 2014)(Vickers & Lyon, 2014)(Martin & Osberg, 2007). In the Netherlands today approximately 4000 organisations are operating as a social enterprise (Social Enterprise NL, 2015)(European Commission, 2015).

What distinguishes the social enterprise from ‘normal’ business enterprises is that there is a clearer and more easily identifiable social mission that the organisation seeks to fulfil; instead of being focused purely on creating value, success is determined by maximising its social impact (Blount & Nunley, 2013)(Martin& Osberg, 2007)(Social Enterprise NL, 2015). According to Ashforth & Reingen (2014), the social mission is the reason for the existence of social enterprises- they are businesses that trade for social purposes or seek to solve social problems through business ventures (Smith, Gonin & Besharov, 2013)(Dees, 1998)(Sepulveda, 2014)(Dacin, Dacin & Matear, 2010).

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not depend on making profit, but rather on finding the right balance between social and business outcomes, or between sustainability and economic outcome, given the critical importance of the business aspects in advancing the social ones (Sepulveda, 2014)(Dees, 1998)(Battilana & Lee, 2014). Profit is merely a means to an end (Dees, 1998)(Battilana & Dorado, 2010), with the ultimate success being a tangible improvement in ‘human and social welfare’ (Smith et al. 2012).

Arising tension between social enterprise logic and business logic in the

alternative food system

Social enterprises have embedded conflicting social and commercial (or business) logics as a result of their hybrid organisational structure, creating a tension as management strive to strike a balance that satisfies both the social and the business logics (Smith & Lewis, 2011)(Mason & Doherty, 2014). Tension may not be perceived on a day-to-day basis, but it can become particularly apparent during times of organisational restructuring. Phases of change lead to a shift in the representation and manifestation of logics within the organisation (Jarzabkowski, Lê & Van der Ven, 2014).

In order to grow the impact of the social activities, which Mair & Marti (2006) point out is difficult to determine and measure, business elements need to be incorporated to facilitate development and growth within the organisation. Expansion and development cannot be achieved by focusing purely on the social mission alone (Borzaga & Solari, 2004). As the alternative food system develops, whether it be through increased production, as a reaction to negative effects from the external environment, entering new markets, introducing new products, or for any number of other reasons, management structures are forced to seek a balance between the two logics as an increased focus on one inevitably leads to less focus on the other.

There is a trade-off between stability and change: adhering to the mission and old structures on the one hand, and developing new structures and practices in order to facilitate growth and development of the mission on the other (Jarzabkowski, Lê & Van der Ven, 2014). Organisational development or growth is difficult for alternative food actors; sourcing finance and establishing the capacity that organisational growth requires whilst simultaneously maintaining their social focus can be immensely difficult (Social Enterprise Monitor, 2015)(Bloom & Hinrichs, 2010).

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whereas producers that are delivering according to alternative standards are usually operating on a much smaller scale and as such there is less capacity to call upon. Moreover, the production of ‘alternative’ products is more intensive, and thus expensive, as the alternative food producer cannot use antibiotics, hormones or pesticides to increase output from land or animals and in many cases producers are subject to strict certification.

In addition to that, for many alternative food actors it is difficult to obtain the finances necessary to make investments. As a result achieving growth is a time-consuming process in which the alternative food actor has to balance the increasing imperative of business logics against the danger of compromising the social nature of the social enterprise. When tension between the social enterprise and business logics increases, a potential ‘pay off’ between the two competing logics becomes more and more likely, with social goals possibly being compromised in order to achieve the organisational growth demanded by the business logics (Franklin, Newton & McEntee, 2013)(Smith, 2015)(Clark, Woods & Adams, 2015)(Smith, Gonin & Besharov, 2013).

Fritsch, Rossi & Hebb (2013) add that the compromise that arises from the tension can threaten the social mission of the organisation and can ultimately lead to ‘mission drift’- the alternative food system compromises on its distinct nature and becomes more and more similar to the conventional food systems (Ramus & Vaccaro, 2014)(Battilana & Lee, 2014)(Doherty, Haugh & Lyon, 2014). Despite the fact that the alternative food system is a critical reaction to the functioning of the conventional system, a potential ‘rub off’ nevertheless exists. Characteristics of the alternative food system are annexed from the conventional food system and vice versa, making it possible that the alternative food system could merge into the system it once criticised, particularly under the pressures generated by the aforementioned tension (Jay, 2013)(Roos, Terragni & Torjusen, 2007)(Vittersø et al.,2005)(Sonnino & Marsden, 2006)(Franklin & McEntee, 2011).

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When the alternative nature is not guarded the alternative food actor runs the risk of compromising on the characteristics that provided the alternative food system with its competitive advantage, namely the connection to the customer, the relationship to the local community, the autonomy and the control of the food supply chain (Doherty, 2011)(Nousiainen et al., 2009)(Joassart-Marcelli & Bosco, 2014). Organisational growth leads to increased tension, the alternative food actor has to put more effort in to maintaining its social mission in order to avoid ‘conventionalisation’ (Doherty, 2011). The paradox is thus; that as the organisation aims to increase the effect of its social mission, it runs the risk of comprising the integrity of that same mission and the characteristics that made it distinct in the first place (Smith & Lewis, 2011).

Managing the tension between social enterprise logic and business logic

The internal duality and resulting tension arise across all levels of the social enterprise organisation, creating a complex organisational structure that requires a unique form of management to ensure the sustainability of the social enterprise (Ebrahim, Battilana & Mair, 2014)(Jarzabkowski, Lê & Van de Ven, 2014)(Battilana & Lee, 2014)(Battilana & Dorado, 2010)(Smith & Lee, 2011). The tension complicates decision making as the organisation strives to build a collective and coherent system where both structures find a place (Doherty, Haugh & Lyon, 2014). It is highly important that the tension is managed adequately as it has an impact on the direction of the social enterprise and determines its long term success (Smith, 2015).

Adequate management of this tension stimulates creativity and could be a possible source of innovation, benefiting from the innovation potential that its hybrid structure offers (Lewis & Smith, 2014)(Battilana et al. 2012). Management and leaders need a more extensive set of skills than in conventional organisation, to allow them to manage and take advantage of the combination of social and business goals (Smith et al., 2012). Therefore, a ‘unique form of governance’ is necessary for the proper management of hybrid organisations or a social enterprises (Hales, 2015).

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Choose to ignore and avoid dealing with the tension

Although not extensively discussed in the literature about managing the tension in social enterprises, ignoring that the tension exists and affects the organisation is a possible strategy to manage the internal duality. Choosing to ignore the tension is a defensive method of dealing with the pressure arising, forcing the organisation to look for alternative ways to develop, but in doing so it could possibly compromise its success as the effect of the social mission is marginalised (Smith, 2015)(Lewis & Smith, 2014).

The downside of ignoring the tension is that it minimises the organisation’s chances of survival (Jarzabkowski, Lê & van der Ven, 2014) as it fails to learn how to deal with the conflict and as such to fulfil its full potential. Managers active in organisation that adopts an approach of ignoring the tension tend to think in terms of ‘either, or’ (Smith et al. 2012). As a result they fail to capture the positive externalities that can arise from the hybrid nature, and this tends to mean that the organisation is unable to achieve or maximise any success towards fulfilling their social mission. Instead of going for maximisation of growth these enterprises choose to remain small and maintain their distinct place in the market in order to avoid the demands and compromises that are associated with growth (Vickers & Lyon, 2014).

To accomplish organisational progress the social enterprise has to look for alternative ways of developing, for instance by increasing their geographical area of engagement or by establishing economic linkages with other communities and producers (Vickers & Lyon, 2014). Doherty, Haugh & Lyon (2014) point towards the option of establishing partnerships, preferably with other similarly oriented actors, instead of engaging with actors who are active in the conventional system (Vickers & Lyon, 2014). Organisational growth may be possible whilst ignoring the tension, but options are very limited and the social enterprise is likely to compromise its potential, choosing either to remain small or engaging in partnerships with firms whose mission might be different from the alternative food actor.

Choosing to suppress one logic

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One of the logics is prevailing on a structural basis. When the undervalued logic suddenly gains importance the organisation’s developing can come to an abrupt halt- the logic has been neglected and the organisation has failed to anticipate its gaining influence. Moreover, a suppressing response could possibly lead to internal conflict in the organisation with employees that adhere to the neglected logic feeling that their point of view is not taken seriously.

Choosing one logic to dominate over the other

Choosing the one logic over the other, temporarily or on a structural basis, allows the organisation to effectively deal with the tension and ensure adherence to a long term strategy. Contrary to the supressing response, dominance of one logic is only targeted at a limited period of time, or only at certain aspects of the organisation. This phenomenon is labelled as a differentiated strategy, or ‘splitting’ (Jarzabkowski, Lê & Van de Ven, 2014)(Smith & Lewis, 2011)(Smith et al., 2012). Splitting allows the organisation to minimise conflict as logics are dealt with as separated, unique elements (Smith, 2015). Managers actively seek distinctions between the fields in order to preserve their distinct nature while also attempting to and satisfy those within the organisation who adhere to the different logic (Smith et al., 2012). Two types of splitting exist, structural or temporal, and both types generally succeed in ensuring that the logics remain in balance. This approach avoids conflict by differentiating the relative prominence of the two logics over time (Jarzabkowski, Lê & Van de Ven, 2014).

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adherents of both logics to feel committed to the organisational mission (Smith & Lewis, 2011). It is thus accepted that one logic temporarily gains dominance over the other in order to avoid conflict (Smith & Lewis, 2011).

Structural splitting assigns different logics to different units or organisational levels, and as a consequence the two logics have no grounds to compete each other and management are freed from choosing between them (Jarzabkowski, Lê & Van de Ven, 2014). Structural splitting occurs when activities that relate to the social mission are separated from those dealing with the business aspects, such as revenue generation (Ebrahim, Battilana & Mair, 2014). The different logics are allocated to different facets of the social enterprise, determined based on the origins of the organisation (Ashforth & Reingen, 2014)(Pache & Santos, 2013). Each facet has a different manager with specific expertise in that field (Smith, 2015). Attaching a logic to a specific activity or department allows the organisation to focus on the different commitments and tasks simultaneously, while also ‘honouring’ the distinct characteristics of both logics instead of trying to mediate time and effort between the two (Mason & Doherty, 2012)(Smith, 2015). The ‘structural compartmentalisation’ also increases stability, as each logic is assigned its own element, and as such there is less competition over which logic is in control of which activity (Huybrechts, 2011). Management avoids the competing demands that the logics would otherwise place on the organisation as a whole and through this approach, Smith & Lewis (2011) argue, an ‘equilibrium’ is established that keeps all members satisfied and secures their commitment to the organisation and its goals (Pache & Santos, 2010)(Pache & Santos, 2013)(Smith et al., 2012)

Finding a synergy

Combining the characteristics of both the social enterprise logic and the business logic creates a mix in which both are represented, finding a synergy between the two makes any tension more manageable whilst simultaneously helping to create a common organisational identity. Finding a synergy is an ‘active’ and ‘integrative’ approach towards tension management (Smith et al., 2012). Both logics are involved in enhancing the social mission as well as generating revenue (Ebrahim, Battilana & Mair, 2014). According to Battilana et al. (2012) establishing a synergy, a situation where managers do not have to choose between the logics, is the ‘hybrid ideal’.

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logics become less apparent, thus support for the organisation increases (Battilana & Dorado, 2010) (Mason & Doherty, 2014). However, even though the tension is more manageable when the organisation tries to establish a synergy approach, managers still need to be able to simultaneously support both sides of the logics divide (Smith, Binns & Tushman, 2010).

Compared to the other approaches such as ignoring, suppressing or splitting,the synergy approach is the most difficult one to achieve. Beyond the qualities that are necessary for managing either a social organisation or a normal business, synergy managers needs the skills to bridge the gap between both fields (Smith et al., 2012). They need to be able to deal with uncertainty, this requires a special set of skills to enable those managers concerned to create an integrative response to the tension. These required skills include the ability to set an agenda in which both logics are equally represented (Smith, Binns & Tushman, 2010), embracing the different views from the conflicting logics (Smith et al., 2012), developing competences beyond the manager’s own field of expertise (Blomgren & Waks, 2015)(Heinecke, Kloibhofer & Krzeminska, 2014) and the ability to establish a transparent structure that allows members from each logic to contribute (Smith et al., 2012). Moreover, in this scenario a broad range of members of the organisation, including those adhering to conflicting logics, need to feel connected and valued in order for the manager to have legitimacy (Blomgren & Waks, 2015). Blomgren & Waks (2015) argue that managers operating according to a synergy approach need to function as ‘linking pins between the two fields’.

Finding a synergy between logics can be established by focusing on long as well as short term goals and emphasising the overarching, and positive, aspects of both (Smith, 2015). Mason & Doherty (2014) argue that organisations can offset the tension and its resulting difficulties by concentrating on the benefits that arise from the social enterprise logics and the business logics- the hybrid nature should not be seen as a threat to the organisation. The integrative approach attempts to ensure the support of all organisational members and encourages them to contribute to the organisation’s success (Pache & Santos, 2013)(Jay, 2013)(Smith & Lewis, 2011). Commitment to the social mission allows for the coexistence of both logics (Vickers & Lyon, 2014). Rather than fearing the tension and competing logics their presence is accepted and the management is aware that business logics are a necessary element (Pache and Santos, 2013).

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from the hybrid nature, capturing the positive externalities that come out of engaging with both logics (Mason & Doherty, 2014) (Smith et al., 2012)(Smith, 2015).

While almost all social enterprises are seeking to deal with their hybrid internal organisation and the tension that results from competing social and business logics, it is highly likely that there will be differences in how individual organisations are responding to and managing the internal duality. There is a wide variation in how tensions emerge and exist within organisations (Besharov & Smith, 2014) and as a result there is inevitably a variation in the kind of responses that emerge, with managers in different organisations seeking to tackle the issue in different ways. When facing similar conflicting demands, each organisation may experience and deal with it differently, and as such there is a multitude of ways to react (Pache & Santos, 2010)(Jay, 2013).

It has become clear through the existing literature that the degree to which logics are interacting and integrated with each other determines the degree of tension that emerges on an organisational level, resulting in multiple options for managing the tension between the two logics. Research by Battilana & Dorado (2010), Pache & Santos (2013) and Smith (Smith et al., 2012, and Smith, 2015) has illustrated that management of tension is crucial for the social enterprise; dominance of one logic over the other can lead to a drift in the organisational mission, and possibly even failure and dissolution of the social enterprise. Good management can ensure that the organisation is able to capture the positive outcomes of the hybridity, but identifying the symptoms of the tension can be difficult and this can hamper attempts to mitigate any negative effects.

The tension between social and business logics is often wrongfully described as a given and as a static phenomenon (Smith & Lewis, 2011). However in emerging fields it is highly likely that the tension is not static but is in fact a dynamic progress, becoming stronger when one logic in the organisation becomes increasingly dominant. Applied to social enterprises, this research specifically elaborates about the tension between social enterprise and business logics in the alternative food system. The field of alternative food is new, emerging and many firms active in the alternative food system have experienced recent growth.

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Research Design

A case study method was used as the basis of this research. The literature review discussed the existing explanations for the emergence of tension between social enterprise logics and business logics. The case study adds an in-depth analysis of how the tension emerges in the alternative food system by looking how different alternative food actors perceive and manage the tension in their organisations.

Methodology

Myers (2009) proposes the following definition for a case study: ‘a case study uses evidence from one or more organisations, in an attempt to study the subject matter in context’. Gerring (2004) adds that a case study is an ‘intensive study’ into a specific unit, in order to ‘generalize across a larger set of units’ (Gerring, 2004). A case study method is appropriate when studying a complex social phenomenon in its specific, real-life, context (Jonker & Pennink, 2010)(Baxter, 2008). A requirement to study phenomena in their proper context is one of the criteria established by Yin (2003) for determining whether a case study is the correct approach. The second requirement is that the researcher should be an outsider who is not involved in the case, and that they should not seek to exert influence on the context.

This research undertakes a subjective approach and tries to make sense of how the phenomena of tension emerges within the alternative food system and what the effects of it are on those organisations concerned. The nature of the research question also fulfils the third requirement established by Yin (2003) as it seeks to find an answer to a ‘how’ question: how is the tension perceived and managed? A case study design is therefore appropriate for this research as it studies a dynamic phenomenon, the tension between social and business logics, in a specific context- the alternative food system. The research seeks to understand how decisions are made under the influence of the hybrid, dual nature of the organisation and whether business or social decisions are given more prominence. Evidence from interviews is used to make a contribution to the knowledge-base regarding the tension between social and business logics in hybrid organisations.

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cases is necessary for this research, as it deals with a dynamic and emerging field with a ctors focusing on different characteristics of ‘being alternative’. The variety of actors involved in the alternative food system makes the research unfit for only a single case analysis. A multiple case study design allows for representative findings and a more thorough understanding of the subject of the research (Wahayuni, 2012). Analysis of the cases helps to establish a broader picture of how the tension affects the alternative food actors.

The primary purpose of this research is not so much to build a theory, but rather serve an illustrative purpose by uncovering patterns in how actors perceive and manage the tension previously described (Eisenhardt, 1989). The exploratory and qualitative nature of the case studies allows for new insights into the applicability of the concept of tension emerging within organisations with a hybrid internal structures, and leads to the defining of possible hypothesises that could be used as a basis for future research.

Case selection

In seeking to find an answer to the central question for this research, several case studies were selected to investigate how the actors in the alternative food system experience social enterprise or hybrid tensions. Keeping in mind the limited time frame of the research, a sample of six alternative food actors was selected, all based in the Netherlands. In Table 1 on page 21 the list of cases is presented, including a short description of the organisation its activities.

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Table 1: Overview of cases (derived by the author)

Case number CASE 1 CASE 2 CASE 3 CASE 4 CASE 5 CASE 6

Name of the organisation Jaring Brunia www.zogroenalsgras. com Groentebuur www.groentebuur.nl Bakkerij Braaksma Tony’s Chocolonely www.tonyschocolonel y.com Restaurant It Ambacht www.restaurant-hetambacht.nl Bakkerij Staghouwer www.bakkerijstaghou wer.nl Commercial activities

Dairy farm Offers organic, seasonal box of vegetables. Ordered online and delivered to your home.

Bakery Sale of chocolate bars Restaurant Bakery Age & Structure of the organisation Sole proprietorship since 5 years. Founded by interviewee’s parents. No other employees. 5 years. Total number of employees is 5. Management consists of the 3 co-owners and 2 employees working on a voluntary basis. Project operating since 3 years.

Bakery exists for over 20 years. Family business. Approximately 10-15 employees. 10 years. 3 shareholders. CEO owns 51% of the shares (Tony’s Chocolonely, 2014). Approximately 20-25 employees. 4 years. Board of Directors consists of 3 shareholders. In total there are 7 shareholders. 3 years. Bakkerij Staghouwer owns 3 shops. Multiple selling points Approximately <10 employees Role of Interviewee

Owner Founder & Co-owner

Founder & Owner

Chain Director Chef.

Owns 40% of the shares (other 6 shareholders each own 10%) Founder & Owner

Social activities Organic, Community

Local, Organic, Community

Local, Organic Fairtrade, (Organic,) Social Justice Local, (Organic,) Education, Community, Social Justice Local, Organic, Heritage or Artisan Social purpose -Avoid intervention of farmer in natural practice -No use of antibiotics, hormones or extra feeding -Consideration of pasture birds -Organic, local food available at lower price -Increased freshness of the product, direct from farmer to consumer -Avoid food waste, no selection criteria for vegetables -Fair, market based price for the farmer

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Due to the diversity and dynamic nature of the alternative food system emphasis was placed on the alternative nature of the actor. Actors in the alternative food system can adhere to one or more social purposes as the basis of their ‘alternative nature’.

It is possible that one actor is striving to achieve multiple social purposes: the use of organic and local ingredients, to educate about good food, to create a link to the community, to ensure fair labour relations, to establish a circular economy or to increase health and/or social justice. The activities of alternative food actor are therefore an important criteria in order to create a sample that reflects the variety alternative initiatives.

Next to the alternative nature of their activities the cases selected should have a true social nature. Sustainability is a hot topic and as such some firms seek to present themselves as sustainable solely to gain a market share rather than because they actually are operating in a sustainable manner (McIntyre, 2009). There is not currently a legal framework in existence where social enterprises are defined, and as such it is impossible to select the cases by using legal form as an identifier for a true social nature. Instead, we looked at organisational structure and how organisations described their activities on their website.

Special attention was given to whether the alternative food organisation has recently experienced a phase of restructuring of growth, as the literature suggest the tension is most likely to arise during times of organisational change (Jarzabkowski, Lê & Van de Ven, 2014)(Smith & Lewis, 2011). Defining what is meant by an organisation having recently experienced growth is not a straight forward process, as growth could be the establishment of a partnership, opening a new store or adding new products or services to the organisation its portfolio. Growth may also be negative, if the organisation for example had to deal with a downsizing of operations.

Another criteria appropriate for selection of the cases was the age and size of the organisation. No minimum requirement was established, but the criterion was merely introduced in order to ensure that a diverse and rich sample of cases was constituted. Organisations that have existed for over two years are more likely to have experienced the tension as they are likely to have experienced growth since being created. Moreover, the very fact the organisation is still in existence suggests that it has found a way to manage the tension.

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relatively new field and it is therefore inevitable that many organisations active in the industry are still relatively small in size.

A final criteria was that the interviewee should either be the founder, the owner, or involved in high-level decision-making. This research studies the tension at an organisational high-level, and it is considered likely that the decision-making process is affected by the tension previously mentioned. Interviewees involved in decision-making are therefore more likely to have experienced the possible trade-off between logics.

Data collection

The focus of this research will be on the organisational level of the social enterprise, providing the research with a holistic lens. By studying how the tension is perceived and managed at a macro level this research specifically deals with the ‘organisational paradox’ as introduced by Smith & Lewis (2011). The limitation of this approach is that data reflects only the opinion and experience of members active at the organisational level. However, research by Jarzabkowski, Lê, and van der Ven (2014) shows that the tensions arising at different levels in the organisation are highly interrelated. Studying the tension at an organisational level should thus provide an overall view of the organisation, with findings at one level being broadly representative of all the other levels too (Jarzabkowski, Lê, & van der Ven (2014)(Smith & Lewis, 2011).

Primary data was obtained from interviews with members central to the organisation, preferably members involved with the establishment of the organisation or those involved at a decision-making level. The interviews were of semi- structured nature, split in several predetermined themes that served as a guideline structure for the interview. A complete list of these themes and pre-formulated questions can be found in Appendix 2.

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Next to data collected from the interviews, secondary data was also gathered from publicly available sources such as newspapers, magazines, organisational reports and the organisation website (Myers, 2009)(Wahayuni, 2012). The use of secondary data, alongside the primary data, ensured a complete and in-depth understanding of the social as well as the business activities of the selected cases.

Data Analysis

Data analysis was performed using the audio recordings of the different interviews. The recorded data was transcribed for each of the interviews. In order to analyse these transcripts the coding method was applied, whereby content of the interviews was coded according to multiple pre-determined codes (Myers, 2009). The nature of the research is inductive, therefore the emergence of new codes during the coding process was allowed. A full list of codes can be found in Appendix 2.

Each case was assessed separately, after which outcomes of the different cases were combined in order to find if a pattern exists regarding how alternative food actors experience the tension between social enterprise and business logics. Eisenhardt (1989) argues for the importance of a separate analysis between cases; a within-case analysis, followed by a comparison and a cross-case analysis, in order find similarities or differences between the cases. Outcomes of the cases can then be examined to see if there is any correlation between the ways in which the different cases seek to address the issue of conflicting logics within their organisations.

Reliability and Validity

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Findings

In order to illustrate how alternative food actors perceive, and possibly manage, the tension between social and business logics, six cases were selected. Despite their different activities all of cases shared an alternative approach to food production or food consumption.

In this section the findings from the interviews conducted with each of the cases will be presented. To begin with the most remarkable points about the specific cases will be discussed, followed by a cross-case analysis in order to uncover differences and similarities between the cases.

Within-case analysis

Case 1 – Farmer Jaring Brunia

Jaring set up the farm with the idea that a farmer should not intervene in the natural processes, and instead work according to all that nature has to offer. He grew up as son of a farmer but never intended to take over the family business. His father had already sold the quota they owned for milk by the time that Jaring realised he did want to become a farmer, but he did not want to be a conventional one. He was inspired by other alternative organisations and the idea that a farmer should run his firm as simply as possible.

His social mission is to not intervene, but instead work according to processes that are led by nature. His aim therefore is to show respect towards animals and the environment, and to let nature run its course.

Conventional farmers could resolve to inject hormones when a cow does not provide enough milk. However, in order to adhere to the social mission, Jaring has to look for other, natural, measures to ensure that the milk production is increased. For instance finding the correct composition of grass types for his land in order to maximise the amount of milk his cows can give on a monthly basis. These circumstances, such as when a cow does not give enough milk, have resulted in a struggle for the operations at the farm. When encountering problems with production or adverse weather conditions, it is difficult not to deviate to conventional practices. The natural practices require more time and effort as well as research and testing. A move towards a conventional method of injection or extra feeding would be an easier and less costly thing to do.

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huge investments were necessary in order to start the organisation and this required a dominance of business logics, Jaring was purposefully aiming to establish an alternative farm and knew that the investments were the only way to accomplish this. The increasing business logics would only create pressure to opt for a less costly, but still ‘alternative’, investment. A compromise on the social mission was not likely, as it would defy the purpose of establishing the organisation. During later stages this compromise became probable and Jaring felt he had more difficulties in deciding what to do, as the move towards a less alternative option would reduce the amount of investment required.

‘In the first phase you really need to make a lot of investments to make the social mission possible, in this stage of the organisation its more about NOT doing investments’. ‘I now have to

make sure that I can generate return without compromising on my mission’.

Not making investments refers to avoiding interference when it is not necessary in essence. Jaring’s desired way of farming is one where the farmer interferes as little is possible in the natural ecosystem. Minor investments that are not necessary per se could potentially lead to a move away from the social mission.

Also, during the first stages getting a return on investment was less important. It was more about establishing the organisation and learning how to operate it along the way. Now that the organisation is at a more developed stage the return becomes more important, and the interviewee has created financial goals.

‘The first years I focussed on learning, now it is time to generate some returns’

This year’s mouse plague led to unexpected extra costs, and as such Jaring will not be able to reach the pre-set financial goals. These external conditions cause an increased tension. The interviewee manages the tension, or ignores its presence, by focussing on expanding the impact of the social mission through education about alternative farming. He gives tours around the farm and lectures in order to show to people how he believes farming should be done. Moreover, a documentary about his mission and methods is in the making. As a young farmer, causing a stir in the conventional system, Jaring attracts a lot of publicity and he is seen as an example. However, he is also looked at with doubt. Some people argue that this unconventional way of farming will not be sustainable or profitable on a long term basis. The interviewee states that due to publicity and the tours he gives, he receives compliments about his way of running the farm. This helps him to remain focussed on achieving the desired outcome and showing that this way of farming is possible.

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‘I want to give the right example’. ‘Part of the success I already have achieved has become by educating people about my values, now the firm has to grow and created financial returns’.

Currently Jaring is the only person active in the farm, but he is hoping to add an extra worker in the coming year. The interviewee was asked what kind of values he would place importance on when hiring a new employee. As the interviewee himself also had to learn all the farming practices, working experience was not considered as an important determinant in the hiring process.

‘A new worker would have to work according to the method I chose to adhere to, if he doesn’t believe in it personally it is going to be tough doing the job’.

Personal values and affinity with the social mission where thus said to be great determinants in the hiring process compared to whether an employee had previous experience of working for a (conventional) farm.

Case 2 - Groentebuur

Groentebuur is an organisation from the North of the Netherlands, selling boxes that contain fresh, local and organic vegetables. Groentebuur collects the vegetables from farmers and delivers them to the customer’s home. Currently the organisation is only operating in the province of Groningen, but they are looking to expand their operations to other areas by setting up an online platform where supply and demand come together.

Their social mission is to make organic and local food available for consumers at a lower price than in the conventional system. The interviewee argued that organic vegetables are kept at an artificially high price that does not reflect free market processes. This is because consumers are generally more willing to pay a higher price for organic products. Furthermore, large amounts of good quality vegetables are wasted as they are not meeting the high standards set in the conventional system. The organic famer sees large parts of his harvest lost due to these standards. On top of that the farmer is under pressure to deliver at a low price, as the large conventional actor can easily switch suppliers and import the vegetables from abroad. Groentebuur establishes a long term relation with their farmers, which makes them less vulnerable to fluctuating demand and sets a fairer price.

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‘Farmers did not see those vegetables as ugly, we realised we should no longer only buy and trade in the vegetables that the conventional firms do not want as this encourages the idea that these vegetables are different than those that are selected’.

It is important to note that the ‘ugly’, unwanted vegetables are available at a lower price, as these vegetables are likely to end up being thrown away.

Groentebuur has spent the first few years since establishment gathering information and forming contacts with local suppliers. Much emphasis was placed on learning; the interviewee indicated that during the first organisational stages the aim was to learn about the current practices in the market. Now Groentebuur is at a stage where growth stagnates. The ultimate goal of the organisation is to set up an online platform where demand and supply of organic foods can be connected, in order to make the vegetables available in the whole of the Netherlands.

‘When that works we will take our hands off and focus on other things’.

Groentebuur plans to make the platform accessible and open for everyone, meaning that other firms can simply copy the practices. When asked why they would not protect and exploit their platform, the interviewee argued:

‘The platform is a means to establish that organic vegetables, of all sizes and shapes, are available to everyone, at a fair price‘.

‘Why should we have the sole rights to it, when by opening it up we can attract more people to participate’?

However, in order for this platform to be set up Groentebuur needs a heavy investment, and as a result the growth of the organisation is postponed until financing is available. Growth of the social mission has stagnated and makes it so that Groentebuur’s social mission cannot be executed in full. The organisation is looking into whether other organisations in their network have the required knowledge to create an online platform, in order to perhaps benefit from a lower price.

The social mission of Groentebuur is not compromised by the stagnation in growth, but its ultimate fulfilment has been delayed by the need to gather finances for their main project.

‘We are looking at options to generate finances in order to make the investment possible, it doesn’t really matter how long it will take, as long as we are able to establish a qualitative

system’. ‘One of the things we are thinking about is resolving to crowd funding’.

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Case 3 – Bakkerij Braaksma

Bakkerij Braaksma is a family owned bakery in the province of Friesland that introduced a range of bread, made by grain produced on their own land in the region. Not all of its products are made from this grain- it is only the special local product range where the grain is used.

The reason for starting this project was to offer customers a truly local product and to make the consumer more aware where their food comes from, by establishing clearer, more transparent and shorter linkages between all stages of the supply chain.

‘By growing the grain on a field next to our bakery, and processing it in the mill close by, our

consumers can see what we make the bread from’.

Case 3 is different than the other cases in the sense that it only is a part of the organisation that acts as a social enterprise. In Case 3 an approach according to the ‘splitting’ method can be seen. The social mission is only assigned to certain parts of the organisation, in this case the projects with the local grain produce. Other parts of the organisation focus more strongly on the business logics; they are run like a normal business enterprise, dealing with ‘conventional’ bakery activities where profit is an important element of the organisation. The interviewee indicated that for the ‘local produce’ project profit is not important. By separating the project from the normal business activities an organisational structure is created that allows social and business logics to coexist, while minimising the dominance the one logic might have over the other. For Case 3 the social and business logics are perfectly separated- the production of normal bread made from conventional grain, and local bread made from the own organic grain. The two are not overlapping and thus there is no trade-off between them. The method of assigning each logic to a different unit was thus very successful in managing the tension.

The production not only depends on the external conditions, such as weather conditions, but also on the quality of the grain. The produce incurs many extra costs, coming from the strict quality requirements and checks that exist to ensure hygiene and health safety. Growing your own grain brings certain risks, Braaksma mentioned that ‘the amount of products is greatly dependent on our own harvest’. As many customers come to the store especially for this product, the stakes are high to ensure that they can meet demand.

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The feedback from customers is what drives the social mission. Many customers though the bread helped them to reduce bowel problems. Braaksma mentioned:

‘It is great that we can help people this way, so we plan on continuing the project as long as our

bakery will be operating’.

When asked whether the bakery had financial benefits from the project, the interviewee indicated that this would be the case maybe on the long term. The tension emerged over time as the bakery has continued to work on improving the quality of the grain. The interviewee mentioned that innovation and improvement of the grain had taken a long time and that the quality of the product had been greatly improved since the start of the project:

‘Since we started with the production we have invested heavily in order to make the grain more stable, to secure our production’. ‘But to be honest, making profit was never a priority’. ‘It costs a lot of money, luckily we have people in the region that appreciate what we are doing’. ‘Even though we are an independent firm, they help us out, for example with the harvesting, because they enjoy working on the project’.

Possibilities of growth of the project are limited. The bakery cannot increase its production any more, they are currently operating at maximum capacity, the bakery would need to acquire new land to make the production possible. As a result the interviewee indicated that the project is not actively looking for more publicity, as the current production will not be able to provide enough products for the increased demand that would result from a publicity campaign. During the first stages the bakery was regularly featured in news articles or magazines. The interviewee indicated that in the early days the bakery deliberately was looking to be featured in the news, in order to gain attention for the project. He mentioned that this no longer is the case. The bakery will continue production, but has decided not to give new awareness to the improved quality of the product.

‘It’s okay like this, we can’t increase the production, and therefore we would need to buy more land, so we try not to give extra attention to the increased quality’.

‘It’s a pity, as some customers may like the new quality, but are not aware that we have changed it’.

Case 4 – Restaurant It Ambacht

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from the food service industry. They are given an in-house training, learning to work in the restaurant kitchen and gaining culinary skills in the process. The business goal that the restaurant strives for is to gain a Michelin star as a recognition of the quality of their food, as well as a developing and retaining a profitable annual turnover with good returns to shareholders.

The interviewee indicated that the balance between social and business goals was difficult, and suggested that tension was most strongly experienced during the process of development and ‘bringing the organisation to a higher level’. In terms of bringing the restaurant to a higher level the interviewee referred to being rewarded with great culinary reviews and gaining status as a high quality restaurant. This seems to be not entirely compatible with the social mission. Despite gaining praise for their restaurant, a lot of attention from the critics is going towards the social aspects of the business. The interviewee indicated that he feared that their social nature harms customers’ association of quality:

‘Somehow people, and even critics, use our social work as an excuse, the idea exists that maximum top quality cannot be achieved as the cooking is done by youngsters’.

The dual nature has clearly resulted in a tension, as the two goals they have set themselves are not proving to be compatible. The solution for It Ambacht lies in pushing the social mission more into the background as a means of ignoring the tension. The social aspects are still very important, in fact it is what distinguishes the restaurant from other restaurant in the volatile market, but less publicity is now being given to it. In earlier phases the restaurant was using its social nature as a unique selling point, with the social mission being widely discussed on their website and in articles the restaurant was featured in. But now It Ambacht aims to keep the social mission more at the background, focussing more attention on the quality and the unique dining experience they offer. The social mission remains central to the organisation, but less attention is given to it publically.

‘We want to offer them the full picture, so that the youngsters know where the product they are using is coming from’ .

In the background, It Ambacht continues to develop their social mission and increase its impact. The interviewee indicated that they like to increase their engagement with suppliers, using even more regional products in their kitchen. In addition, more engagement allows the restaurants to take the youngsters ‘in the field’ and show them where products find their origin, providing insight into the process from production to table.

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quality the restaurant can offer. As a result It Ambacht is looking to increase its social mission beyond its own organisation. The restaurant is establishing partnerships with other restaurants and theatres to allow the youngsters to learn about more and more diverse aspects of the food service and culinary industry.

‘By opening up, we are able to give these youngsters much more’, ‘They will have the

opportunity to discover all facets of the food service, instead of only our kitchen’.

The project has now been introduced in other restaurants as well, and It Ambacht has, in collaboration with a school (It Ambacht, 2015), set up a rotating system where youngsters can work in an organisation for a couple of months and then rotate to other culinary organisations. This not only increases the social mission, as more youngsters can participate, it also increases the quality of the social program as the participants are now able to experience all facets of the industry. Vickers & Lyon (2014) stated that social enterprises can establish organisational growth by establishing partnerships with like-minded actors. From this case it can be seen that It Ambacht engaged in partnership to increase, and maybe even improve, their social mission.

The interviewee also added the importance of a social spirit of the employees. The youngsters involved in the social project have a troubled background and a lot of the time it is hard for them to adjust to such a structured routine. The employees working in the restaurant have to be able to deal with these youngsters and their problems. The interviewee indicated that, although the ability to make customers feel at home and welcome was the most important priority, that affinity with the social values was certainly an factor considered during the recruitment of new employees. Training was offered to the employees in order for them to learn how to deal and work with the youngsters.

Case 5 – Tony’s Chocolonely

Tony’s Chocolonely was set up ten years ago, with the aim of developing chocolate bars that are 100% slave free. This means that the farmers from which Tony’s buys cocoa beans are given a fair price for their products. The founder is still involved in the business, but only in an advisory role.

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Bean-to-Bar concept, making every step in the supply chain transparent. The key point in this is that their cocoa beans are traceable, Tony’s knows exactly which supplier the beans are coming from. Other chocolate makes are still buying ‘mass balance’ beans, a system which is a step towards a fully Fairtrade system. Under mainstream practices if the organisation buys an amount, say 30%, of its beans from a certified supplier, it is allowed to label 30% of its products as Fairtrade. Beans, certified and uncertified, are collected and sold together as one batch of beans, buying these Fairtrade certified beans thus means that you are can never be sure whether your beans are truly certified or not.

The tension emerges in meeting the growing demand. Last year, Tony’s chocolate bars entered the shelves of large supermarkets. Availability of the products has increased sharply, leading to a growing demand. Tension arises as Tony’s does not have a large enough supply of traceable beans. Their suppliers, with whom they have had a long term relation, could not meet the demand. Instead, Tony’s had to resort to mass balanced beans. Still Fairtrade, but not 100% traceable.

‘Sometimes you have to make a decision to go for a not-so-sustainable ingredient on the short term, in order to be more sustainable in the long run’.

‘We could have decided to stop production and wait until we have more traceable beans available’. ‘But we have contracts with the retailers, we would lose our position in the shelves and never earn it back’. ‘What happens if our farmers can deliver the good beans again, what if we have nowhere to sell our products, we would not be able to provide the farmers with a long term prospect of earning a fair price’.

The tension emerges over time, as Tony’s tries to create more and more impact and works to grow the organisation. They are looking to set up branches abroad, preferably markets where large, conventional chocolate makers have their headquarters. The interviewee indicated that the social mission goes beyond the Netherlands, with the aim to change the whole chocolate industry.

When asked what was most likely to hold the organisation back in the next five years, the interviewee indicated that finances would be an obstacle. Tony’s is paying farmers a higher price for their beans, double what other firms are paying. The interviewee indicated that the goal and desire is to pay the farmers even more. In addition they are seeking to increase the percentage of the profit that goes to the Tony’s Chocolonely Foundation. However, as the organisation strives to grow its operations, a large part of financing is used for investments. This is justified by focussing on what Tony’s can offer the farmers in the long run; making organisational growth possible results in higher demand, with the result that farmers can then sell more beans to Tony’s.

Managing the Tension between Social Logics and Business Logics: Insights from the Alternative Food System.