A Fair Trade-off? Paradoxes in the Governance of Fair-trade Social Enterprises

Abstract

This paper explores how fair trade social enterprises (FTSEs) manage paradoxes in stakeholder-oriented governance models. We use narrative accounts from board members, at governance events and board documents to report an exploratory study of paradoxes in three FTSEs which are partly farmer-owned. Having synthesized the key social enterprise governance literature and framed it alongside the broader paradox theory, we used narratives to explore how tensions are articulated, how they can be applied within an adapted paradox framework, and how governance actors seek to mitigate paradoxes. The paper contributes to current debates in social enterprise scholarship concerning hybridity (Pache and Santos, Acad Manag Rev 35 (3):455-476, 2010; in Institutional logics in action, Part B (Research in the sociology of organizations), 2012), hybrid organizing (Battilana and Lee, Acad Manag Ann 8(1):397-441, 2014) and operational tensions (Smith et al., Bus Eth Q 23(3):407-442, 2013) by illustrating empirically how the central social/enterprise paradox manifests in FTSEs governance arrangements. We build on the paradox categories proposed by Lüscher and Lewis (Acad Manag J 51(2):221-240, 2008) and adapted in Smith et al. (Bus Eth Q 23 (3):407-442, 2013) by developing a recursive model of legitimacy-seeking governance processes, conceptualizing how boards seek to mitigate, but not necessarily resolve, paradoxes.

Balancing a Hybrid Business Model: The Search for Equilibrium at Cafédirect

“…This second type is particularly prevalent where the social enterprises' beneficiaries are different to the social enterprises' customers (Santos et al 2015). Structural separation is the commonly suggested solution, in which the two sets of activities are decoupled into compartmentalized subunits to negate this tension (Battilana et al 2012;Mason and Doherty 2016). Conversely, Battilana et al (2012) suggest hybrids should try to find mechanisms to integrate these differentiated activities, leading to commercial and societal benefits simultaneously.…”

“…The need to satisfy a wide array of external stakeholders produces tensions which pervade across the entire organizations business model (Lumpkin et al 2013;Mason and Doherty 2016). Nevertheless, responding appropriately to the demands of different stakeholder groups has been associated with strategic effectiveness (Battilana and Dorado 2010;Brown and Iverson 2004).…”

Towards an Appreciation of Ethics in Social Enterprise Business Models

“…The dominant discourse on SE emphasises its hybrid organisational form, or forms, blending mission and market logics that are coined variously as 'businesses with social purpose' or 'in business for good' (Billis 2010;Mason and Doherty 2015). As Defourny and Nyssens (2010, p. 44) note, in agreement with Pearce (2003), 'for all schools of thought, the explicit aim to beneit the community or the creation of social value is the core mission of social entrepreneurship and social enterprises'.…”

“…Whilst there appears to be broad support for integrating ethical decision-making into social enterprise (SE) governance systems (Ridley-Duf and Bull 2016;Spear et al 2009) and developing ethical production and consumption practices through 'fair trade' business models such as Fairtrade (see Davies and Crane 2010;Doherty and Davies 2013;Mason and Doherty 2015), there is a void in the SE literature on the connection between its alleged hybridity and resulting business ethics. We will argue that this void hides the diversity of ethical, moral and political choices implicit in the labels applied to diferent SE business models.…”

An Examination of Tensions in a Hybrid Collaboration: A Longitudinal Study of an Empty Homes Project

“…Table 5 presents a framework summary of our synthesis by identifying the challenges, tensions, how these tensions were mitigated, and finally the outcomes of this hybrid collaboration. The notion of social enterprises adding value compared to their commercial competitors has been comprehensively addressed in the social enterprise literature (Hockerts 2015;Mason and Doherty 2016), and featured extensively in our interviews. It was felt that, as social enterprises, Urban and Rural brought additional social benefits such as training schemes and helping vulnerable people who would otherwise have been so-called "hard to reach" groups, as far as Council was concerned.…”