Processes of change, innovation and capabilities development within organisations have long been recognised as involving tensions between competing interests and cultural logics. This paper contributes to the understanding of such dynamics by focusing on how newly emergent public service spin outs operating with hybrid governance structures are able to develop capabilities that allow them to innovate and operate at the interstices between the public, private and non profit sectors. Case study evidence from recent UK public sector spin-out organisations is used to explore how leaders, staff and other stakeholders make sense of and respond to the challenges and tensions involved.
The paper contributes to theory by combining an empirically-informed understanding of hybrid organisations within a wider institutional perspective, building theory through the use of 14 detailed case studies. While taking the organisation as the unit of analysis, this qualitative study focuses on organisations in transition to examine the structural and cultural dynamics involved, drawing on the perspectives of multiple stakeholders, including leaders, board members, senior managers, junior staff, user representatives, and commissioners (funders) of public services. Two main research questions are addressed: What are the tensions and paradoxes related to hybridity in public sector spin-outs?; How do organizations develop capabilities to cope with such tensions and paradoxes?
Although such tensions can be found in many different organisations, the hybrid nature of social enterprises means that paradoxes and multiple tensions are confronted more explicitly than elsewhere. Interviewees reported that the new hybrid forms have enabled a range of innovations in four categories:
1) Organisational – new forms to facilitate mutual/social enterprise ideals of democratic governance and decision making and the greater involvement of staff and communities/service users, as well as furthering organisational flexibility and business growth.
2) Improvements to existing systems and services – often driven by immediate financial (cost cutting) and operational efficiency considerations in the new.
3) New treatments and well-being services – often driven by the need for preventative approaches.
4) Outreach and social marketing - new ways of communicating health and well-being messages and services within communities and for certain demographic groups, including the ‘hard to reach’.
For exploring these innovations, three paradoxical tensions are examined in detail: creativity versus resistance to change, democratic versus hierarchical decision making, social mission versus commercial objectives. These paradoxes can be found at both the organisational level (i.e. as expressed in conflicts between functions and the related group subcultures) and at an individual level (i.e. where tensions are internalised). We theorise how organisational hybridity can be an asset in accommodating paradox and developing the capabilities needed to cope with a range of tensions. Paradoxes therefore shift from being a source of confusion to becoming a source of creativity and competitive advantage.
The paper shows the need for greater understanding and theorizing of the different tensions organisations face when innovating. This is particularly true of hybrid organisations at the interstices of the public, private and non-profit sectors where tensions can be accentuated. Cultures of innovation are strengthened when organisations can manage the paradoxical tensions rather than suppressing or avoiding them. The distinction of organisational and individual level tensions allows for a clearer understanding of dynamic capabilities needed to cope with complex and rapidly changing contexts. These issues are of growing relevance for innovation in general but particularly for innovation in public services. In an age of austerity and reform, there is a growing need for innovation from a wide range of types of organisations.
Key words: innovation, hybridity, paradox, capabilities, social enterprise, public services
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