Coping with and benefiting from institutional complexity in impact investing

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School of Business | Master's thesis
Degree programme
Management and International Business (MIB)
This thesis studies how organizations cope with, or in the best-case benefit from institutional complexity. Managing institutional complexity has been a topic of interest in management research during the past decade. It is essential to an organization to manage its institutional environment which contains multiple, possibly contradictory institutional logics, which may prescribe mutually exclusive or conflicting behaviour. Failing to manage institutional complexity may lead to a loss of organization’s legitimacy. Vice versa, successful management of complexity may lead to a particularly legitimate status. Research on hybrid organizing is closely related to research on institutional complexity – organizations which combine multiple logics are called hybrids. In this thesis, four Finnish impact investing and development funding organizations and their responses to complexity are studied. Impact investing is marketed as a mix of investing and philanthropy. Thus, it provides an interesting setting for studying institutional complexity and hybrid organizing. In this thesis, four professionals working in impact investing or development funding organizations are interviewed. Qualitative research method is used to gain in-depth knowledge about how organizations experience, cope with and benefit from institutional complexity. A comparative multiple-case study method is used to allow cross-case analysis between the cases and field-level analysis of Finnish impact investing. In this thesis, organizations and individuals are autonomous actors, which are capable in using institutional logics as tools for their benefit, but are still affected by the institutional environment and logics. The theoretical finding of this thesis is that strategic responses used by the case organizations are symbolic coupling, selective decoupling and hijacking logics, as suggested by previous research on the subject. The empirical findings of this thesis shed light on impact investing as an investment philosophy related to socially responsible investing. It is an emerging field that aims to bridge the gap between public sector and private capital to ensure funding for public sector services in times of public budget deficit. Managerial implications follow that managers in organizations should be aware of institutional complexity to be able to consider and execute appropriate strategic responses. Institutional complexity poses a risk but also an opportunity for organizations to benefit from a mix of institutional logics. Field-level implication for impact investing organizations is that a new field benefits from a pioneer organization that takes the primary responsibility for legitimating the emerging field, thus making it easier for willing organizations to follow. Implication for the public sector is that impact investing should be considered as an innovative, potential and basically risk-free funding mechanism for the public sector.
Thesis advisor
Pakarinen, Pauli
Lyytinen, Tatu
institutional complexity, impact investing, institutional logics, hybrid organizing
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