Brakes to the diffusion of a two‐sided social innovation: A case study on microinvestors' perspectives

• Author: Glòria Estapé‐Dubreuil,Arvind Ashta,Stéphan Bourcieu,Jean‐Pierre Hédou
• Date: 01 May 2020
• Published date: 01 May 2020
• DOI: http://doi.org/10.1002/jsc.2326

RESEARCH ARTICLE

Brakes to the diffusion of a two-sided social innovation: A case

study on microinvestors' perspectives

Arvind Ashta

1

| Glòria Estapé-Dubreuil

2

| Jean-Pierre Hédou

3

| Stéphan Bourcieu

1

1

Burgundy School of Business, Université

Bourgogne Franche-Comté, France

2

Universitat Autonòma de Barcelona, Spain

3

Burgundy Regional Association of CIGALES,

France

Correspondence

Arvind Ashta, CEREN, EA 7477, Burgundy

School of Business, Université Bourgogne

Franche-Comté, France.

Email: arvind.ashta@bsb-education.com

Funding information

Burgundy Franche-Comté Regional Council,

Grant/Award Numbers: PARI-2, PARI-10;

Banque Populaire

Abstract

The diffusion of social innovation requires overcoming institutional resilience and

ignorance of innovation. The forces of the marketing and development work of the

organization managers may be unable to overcome the strength of the institutional

framework. These institution brakes include soft norms such as values, ideology, and

psychology, as well as hard norms such as regulations. Spurts in the diffusion of the

innovation require exogenous crises to overcome the friction.

KEYWORDS

innovation diffusion, institutional entrepreneur, institutional work, microfinance, social

innovation

1|INTRODUCTION

Microcredit shot into prominence over the last four decades and now

has over 200 million borrowers (Reed et al., 2015) and is a significant

recipient of impact investments (JPMorgan and GIIN, 2013). The high

repayment rates of microcredit may be fostered by shame

(Karim, 2008). They may be accompanied by stress that may lead to

suicides (Ashta, Khan, & Otto, 2015), especially in situations of over-

indebtedness. For entrepreneurial microfinance to work better, we

need to lower the entrepreneurial stress from over-dependence on

debt by ushering in micro-equity.

Nevertheless, micro-equity experiments are still relatively

unknown. We examine one innovative structure providing micro-

equity to examine why it failed even though it was attempted in a

developed country. In short, we use this case study to inform the

question on why interesting and much-needed social innovations fail

to get embedded into the institutional framework.

The answer to this question provides lessons for the diffusion of

social innovations.

Our research builds on the discussion of the institutional cage

(DiMaggio & Powell, 1983; DiMaggio & Powell, 1991) and the embed-

ded agency paradox (Battilana & d'Aunno, 2009) in the relevant litera-

ture. Since our norms and beliefs bound us, we should not usually

want to make changes. However, change does occur. Institutional

researchers stress the need for institutional entrepreneurship

(Bjerregaard & Lauring, 2012; Mair & Marti, 2009; Marti &

Mair, 2009; Zimmerman & Callaway, 2001) engaged in institutional

work (Lawrence, Suddaby, & Leca, 2009a; Palmer, Simmons, Robin-

son, & Fearne, 2015) to change regulations, culture, norms, and rou-

tines. While considerable work has been done on filling institutional

voids in microcredit and other sectors in developing countries

(Khanna, Palepu, & Sinha, 2005; Mair & Marti, 2009; Mair, Marti, &

Ventresca, 2012), very few works have been done on micro-equity

and its lack of success in the developed world.

The present state of microfinance has motivated our study of a

French micro-equity club. The latter is an association of clubs of

investors who mobilize their savings to invest in local microenterprise,

whose need for equity capital is too small to interest orthodox actors

such as business angels or venture capital. In addition to providing

financial capital on a microscale, these investor clubs attempt to help

micro-entrepreneurs through the provision of their social capital. The

interaction of the investors and the entrepreneurs represents a two-

sided market, and the diffusion of social innovations may be more dif-

ficult since institutional disruption is required from both sides. Based

on this case study, we examine the dialectics of forces directed

JEL classification codes: A13, G14, G11, L26.

Our thanks to the members of CIGALES for the time they devoted to us. Our thanks to

review comments from a host of anonymous reviewers, Yann Truong, Frank De Bakker, and

participants at the Financial Inclusion in Developed Countries Mini-Conference in Dijon

(2012), 5th International Research Workshop on Microfinance Management and Governance

in Oslo (2012), and 13th FRAP—Finance, Risk and Accounting Perspectives conference in

Cambridge (2013).

DOI: 10.1002/jsc.2326

Strategic Change. 2020;29:267–283. wileyonlinelibrary.com/journal/jsc © 2020 John Wiley & Sons, Ltd. 267

toward the development of this social innovation and the brakes of

resilience.

We find that there was a lack of disruptive institutional entrepre-

neurship (Bjerregaard & Lauring, 2012; Matthyssens, Vandenbempt, &

Van Bockhaven, 2013) to change values and beliefs. The work

required for change needs not only resources but also to dismantle

old ideas through dialectical mechanisms (Hoholm & Olsen, 2012).

Since two-sided markets and network effects (Rochet & Tirole, 2004)

are often found in social ventures (one for attracting the providers of

resources and one for attracting the target population of the

excluded), we need to alter values and beliefs on both sides of the

market.

The next section reviews the relevant literature on institutional stud-

ies and social entrepreneurship, as well as the conceptual framework that

we mobilize to answer the question of why social innovation diffusion

efforts may be insufficient to overcome institutional resilience. This

review is followed by details on the methodology and the empirical

case study. Then, our findings are presented and discussed. The

results are then used to formulate the inductive hypothesis. The final

section concludes and provides some future research directions.

2|LITERATURE REVIEW

The section critically reviews the relevant literature on institutional

entrepreneurship and social change.

2.1 |Institutional entrepreneurship, institutional

work, institutional change

Many authors emphasize the generally stable and self-strengthening

nature of institutions (Berger & Luckmann, 1986): in fact, institutions

generate behaviors among economic actors tending to reproduce and

reinforce themselves. Whitley (1999, 1992), mainly, gives a central

role to the self-regulatory mechanisms of socio-economic systems

and to mutually reinforcing institutional mechanisms. A paradoxical

vicious circle is generated (Battilana & d'Aunno, 2009): how can actors

change institutions if the actors are influenced and constrained by

existing institutions?

Institutional change has been the subject of many works (Dacin,

Goodstein, & Scott, 2002), both in terms of the processes of institu-

tional change (Holm, 1995) and the modalities of it (Fligstein & Mara-

Drita, 1996; Rao, 1998). Boxenbaum (2004) gives two possible expla-

nations of institutional change. The exogenous explanation considers

that the change occurs when an external shock alters the established

institutional order. In contrast, the endogenous approach suggests

that change emerges from the interactions caused by the players,

whether at an individual level (Zucker, 1988) or at the level of a group

of actors.

DiMaggio and Powell (1991) believe that organizations are not

unilaterally exposed to external constraints, but they also put pressure

on the institutional framework through institutional strategies

(Lawrence, 1999). Therefore, institutions are a space for action for

various organizations that can lead to changes in the rules of the game

(Chabaud, Parthenay, & Perez, 2005, p 67).

Actors likely to influence those rules are referred to as institu-

tional entrepreneurs, a term coined by DiMaggio (1988) to cover

actors who mobilize resources at their disposal to create, modify or

strengthen institutions. This concept of the institutional entrepreneur

is seen as an interpretational lens for understanding the role that

actors can play in the process of institutional transformation, or trans-

formation of a sector or industry. Many authors (Dacin et al., 2002;

Fligstein, 1997) have further developed this concept of the institu-

tional entrepreneur. The institutional entrepreneur appears primarily

as an agent of legitimacy, supporting the creation of institutions that

seem appropriate and consistent with his/her interests. Just like

Schumpeter's entrepreneur develops leadership by combining capital

and innovation to introduce new products or processes, the institu-

tional entrepreneur develops leadership by combining ideas and politi-

cal vision to add new rules which are sustainable, applicable, and more

productive.

The actors who can influence this process (forming rules of

institutional games) and shape these rules hold a form of power

(Bensedrine, 1997). The institutional entrepreneurs deploy strate-

gies and mobilize resources to act on the institutional processes

to orient existing institutions in a way that is favorable to them

or create new institutions. They may define, justify, support or

compete with rivals in their institutional projects (Scott, 1995). In

this perspective, Zimmerman and Callaway (2001) detail the

actions the institutional entrepreneurs undertake to legitimate an

industry such as setting standards and/or to establish the overall

structure.

The work of these institutional entrepreneurs, termed institu-

tional work, is described as the purposive action of individuals and

organizations aimed at creating, maintaining, and disrupting institu-

tions (Lawrence, Suddaby, & Leca, 2009b). This work could include

changes in regulations (Peton & Pezé, 2014) or justifying for continua-

tion through confirmation work, qualification process, and immuniza-

tion of compromises (Taupin, 2012). One complication to studying

institutional work (as we do in this paper) is that the creation and

development of new institutions evidently require disrupting existing

institutions and stakeholders (Marti & Mair, 2009). Any study requires

finding out the agenda of competing institutions and their competing

logics (Besharov & Smith, 2014; Friedland & Alford, 1991; Thornton,

Ocasio, & Lounsbury, 2012), and ways in which collaboration can be

induced (Zietsma & McKnight, 2009). A second complication is that

within the newly created institutions, there are diverse stakeholder

interests to be managed and the institutional entrepreneur has to take

these into account (Kraatz, 2009).

Since the diffusion of social innovation requires creating new

arrangements in society, it requires institutional work at macro, meso,

and micro levels if it is to be successfully diffused (van Wijk, Zietsma,

Dorado, de Bakker, & Martí, 2018).

268 ASHTA ET AL.