Discussion
Austin et al (2006) recommendations suggested a greater emphasis on focusing on the characteristics that affect SE management processes. However, the nature of conflicting rationalities on SE management has meant specific barriers have emerged, at least in regards to emerging markets. Applying a hybrid model is subsequently recommended after conducting country specific research. This is necessary to effectively address the conflicting mission, financial, human resource mobilization and institutional logics necessary for the success of SE in Rwanda and ensure sustainability. Past academic research and literature has identified that hybrid enterprises have addressed external barriers by negotiating, evading, resisting and manipulating (Doherty et al. 2014), to cope with internal identity struggles (Kratz and Block 2008). Our research identifies that adapting to the barriers posed for SE in Rwanda creates both challenges and opportunities, hence consequently affecting the SE mission, financial and human resource mobilization; creating trade-offs to manage inter-reliant, yet conflicting demands.
Mission
First, the social mission has made it essential that management of SE have to create an equilibrium between the social impact and the market/economic logic (Santos 2012 in Doherty et al 2014). The resource scarce nature of the Rwandan social enterprise market has meant managers have to operate under constrained conditions that are often at the service of deprived social groups. Finding this hybrid equilibrium between social and economic logics has meant that Rwandan SE’s are having to manage conflicting and competing logics in resource scarce environments to deal with the institutional constraints (Battilana et al. 2012) while simultaneously being held accountable to various stakeholders (FIND A NEW REFERENCE). Inevitably, this has ordained tensions as a result of the conflict between prioritizing financial constraints over social impact ones (FIND REFERENCE FOR THIS), consequently creating a paradox for the mission goal and in turn posing problems for stakeholder legitimacy (Oliver, 1991). As a compromise, SE’s have had to apply necessary trade-offs, most typically, foregoing profit to maintain an equilibrium between social and economic impact creation (Santos 2012). Some Rwandan SE’s have gone as far as to deviate completely from a primary social focus and onto a profit based approach in order to leverage favourable improved market conditions given the current success of the Rwandan economy (REFERENCE ABOUT RWANDAN ECONOMY DOING WELL). Likewise, having to compete for funds and employees and acquiring new donor and stakeholder as a compromise, new expectations of the SE’s to these groups has in turn influenced the social mission. To tackle this, SE’s are leveraging assistance from many organisations and partners such as Ejo and Idea4Africa, who are committed specifically to assist in business-social impact planning and evaluation as SE incubators.
Finance
Secondly, the nature of Rwandan financial resource access has evidently revealed barriers that have impacted financial resource mobilisation for the majority of SE’s. With no government funds at their disposal, barriers such as competing with both large NGO’s for funding – who primarily win access given their size and experience – and simultaneously contending their SE within a competitive market has means Rwandan SE’s face obstacles on two fronts. Most Rwandan SE’s in this research have therefore indicated an adaptation of their status into a dual business-non-profit approach. By trading off and tailoring their approach to suit institutional financial requirements, SE’s can experience greater flexibility and leverage multiple sources (Pontikes, 2012). However, by still holding the social mission principle of social impact at the core of its business over profit, most banks and venture capital organisations deem them to be a less secure investment due to the perception of a less profit generating motive (Van Sandt et al, 2009), therefore greatly limiting funding opportunities strictly to donors or their own pocket. Although microfinance institutions remain accessible to SE’s across Africa, and in particular Rwanda, (Lasprogata and Cotton 2003), high interest rates, with the lowest being 16% in Rwanda, alongside fast pay back periods have meant SE’s simply can’t rely on a single stream of financial assistance. This has consequently meant that the ability of scaling innovative SE products is restricted, in turn impacting both the social and economic impact of an SE. This is particular indicative of SE’s within the arts and culture sector who rely on unpredictable phases of income. In some cases, SE’s have therefore relied on creating a parallel business venture – utilising the likes of Airbnb and tourism – that are purely profit based as a means of generating income and offsetting overhead costs as a result of financial access limitation. A consequence of this trade off ironically creates a second paradox for Rwandan SE’s. The hybrid nature of SE’s, now being both social and profit focused makes it difficult for financiers, either traditionally through international organisations, state or bank orientated, to effectively categorise and understand their position (Battilana and Dorado 2010). This has meant Rwanda SE’s, especially grassroots SE’s, have faced compromises in regards to prioritizing social over profit objectives. These compromises have included leveraging mixed revenue streams from both financial institutions and donor organisations and internal profit generating means. Adopting a business model approach has proven key in bridging this middle ground for many Rwandan SE’s.
Human Resources
Thirdly, Rwanda SE’s have encountered many barriers in adapting to human resource mobilisation constraints. Although low skilled staff are readily available, given the recurring financial resource barriers, paying employees at the market rate has proven a problem (Zahra et al, 2009), limiting access to skilled employees.
Linked to this, the talent gap currently experienced in Rwanda – a result of only a recent improvement in technical education beginning to materialise among upcoming generations and an amalgamation of a “highly educated middle class almost entirely being whipped out during the 1994 genocide missing – has meant the simple logic of supply and demand has created an imbalance of skilled employees. As a result, most skilled Rwandans seem to choose the private or state sector. Therefore Rwandan SE’s are reliant on volunteers, usually foreign and with high turnover rates and low retention levels (Liu and Ko, 2012), to fill this knowledge gap. This supply of foreign over local labour has been associated with the nature of poor job security of SE’s in Rwanda, as many potential employees find the inconsistent nature of SE financing discouraging in light of job security. Meanwhile it has been identified that it is common place for foreign employees and volunteers to have assets as collateral as financial support in their home countries, enough to financially compensate living conditions in Rwanda. An an encouraging consequence of acquiring foreign and diaspora employees from economically developed nations is the “brain gain of expertise” in technical and advanced knowledge of markets, finance and business. The amalgamation of both local employee knowledge and foreign technical experience has empowered many SE’s to enhance SE management and compete locally with for-profit organisations.
Skilled local talent has been described as hard to attract unless an intrinsic social purpose has inspired them. Where SE’s face less financial constraints and can hire relevant skilled employees with a weak social mission priority, tensions have arisen between volunteers and employees (Liu et al 2012), especially when the mission is adapted towards a greater emphasis on profit; therefore combining the social and commercial objectives are proven difficult. Likewise, SE’s find that when attracting skilled employees with higher salaries; donors, stakeholders and volunteers lose the appeal of the SE (Doherty, 2014), creating a paradox of priorities for SE management in prioritising mission purpose and revenue streams over more qualified employees economically orientated employees.