Sommeno, Tigis Wolde sadik; Me sland, Roy; Randøy, T ond
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The impac o liabili y o o eignness on pe o mance in
hyb id o ganiza ions
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Sugges ed Ci a ion: Sommeno, Tigis Wolde sadik; Me sland, Roy; Randøy, T ond (2024) : The
impac o liabili y o o eignness on pe o mance in hyb id o ganiza ions, Jou nal o In e na ional
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The impac o liabili y o o eignness on pe o mance in
hyb id o ganiza ions
Tigis Wolde sadik Sommeno
a
,
b
,
*
, Roy Me sland
b
, T ond Randøy
b
,
c
a
Cen e o Applied Resea ch a NHH (SNF), Helle eien 30, NO-5045 Be gen, No way
b
Uni e si y o Agde , School o Business and Law, Gimlemoen, Pos boks 422, N-4604 K is iansand, No way
c
Copenhagen Business School, Cen e o Co po a e Go e nance, Depa men o Accoun ing, Solbje g Plads 3, C5.09, DK-2000 F ede iksbe g,
Denma k
ARTICLE INFO
Keywo ds:
Liabili y o o eignness
Hyb id o ganiza ion
Social en e p ise
Mic o inance
Social pe o mance
Financial pe o mance
ABSTRACT
This s udy ex ends he concep o liabili y o o eignness om o -p o i i ms o “hyb id” o ga-
niza ions ha combine inancial and social goals. By using a global da ase o 655 mic o inance
ins i u ions (MFIs) obse ed in 77 coun ies be ween 1998 and 2015, we in es iga e he e ec o
o eignness on he inancial and social pe o mance o MFIs. The esul s sugges a nega i e e ec
o o eignness on he inancial and social pe o mance o hyb id o ganiza ions. Ou esul s also
sugges ha he nega i e inancial pe o mance e ec o o eignness is s onge in o ganiza ions
wi h high social pe o mance and in MFIs hos ed in ins i u ionally weake coun ies. Fu he -
mo e, ou esul s emphasize he mode a ing in luence o scaling and longe enu e o MFIs in hei
hos coun ies. In e es ingly, ou indings also shed ligh on he dual na u e o scaling, demon-
s a ing bo h i s posi i e and nega i e mode a ing e ec s. By applying he concep o liabili y o
o eignness his s udy en iches he unde s anding o pe o mance in in e na ional hyb id
o ganiza ions.
1. In oduc ion
Hyb id o ganiza ions, which apply a business app oach o add ess social causes, ha e ecen ly ecei ed inc eased capi al lows
om in e na ional in es o s (Chen e al., 2018; Xing e al., 2020). These o ganiza ions wi h bo h social and inancial goals lie a he
in e sec ion o con en ional o -p o i i ms and non-p o i o ganiza ions (Haigh e al., 2015; Ba ilana and Do ado, 2010; Dohe y
e al., 2014). Unlike adi ional o -p o i o ganiza ions, hyb id o ganiza ions maximize a social goal in addi ion o a inancial sus-
ainabili y goal. Unlike non-p o i o ganiza ions, hyb id o ganiza ions do no depend exclusi ely on dona ions o subsidies, bu
simul aneously main ain inancial sus ainabili y as a co e goal (San os, 2012; Chen e al., 2017).
1
This wo old goal in ol es combining
“os ensibly con adic o y o ganiza ional goals”
2
(Mille e al., 2012, p. 619), which can lead o ensions and ade-o s be ween he
* Co esponding au ho a : Cen e o Applied Resea ch a NHH (SNF), Helle eien 30, NO-5045 Be gen, No way.
E-mail add esses: [email p o ec ed] (T.W. Sommeno), [email p o ec ed] (R. Me sland), [email p o ec ed], [email p o ec ed]
(T. Randøy).
1
In con as o o -p o i and non-p o i o ganiza ions, which o en pu sue one p ima y goal and pu sue o he goals as supplemen a y, a hyb id
o ganiza ion ypically s i es o align bo h goals ha a e undamen al o i s objec i e.
2
One goal can nega i ely a ec he o he goal (Smi h and T acey, 2016; W y and Zhao, 2018).
Con en s lis s a ailable a ScienceDi ec
Jou nal o In e na ional Managemen
jou nal homepage: www.else ie .com/loca e/in man
h ps://doi.o g/10.1016/j.in man.2024.101133
Recei ed 8 Feb ua y 2021; Recei ed in e ised o m 15 Janua y 2024; Accep ed 19 Feb ua y 2024
Jou nal o In e na ional Managemen 30 (2024) 101133
2
goals. While hyb id o ganiza ions may be o ced o ocus on one goal o e he o he in o de o e en ually ul ill hei blended alue,
3
an excessi e ade-o s can h ea en he iabili y o hyb id o ganiza ions (Eb ahim e al., 2014). This makes he ealiza ion o hyb id
o ganiza ions' dual goals a complex p ocess (Pache and San os, 2013; Smi h e al., 2013). In conside ing he unique duali y o hyb id
o ganiza ions' o e all goals, we ake he issue one s ep u he by add essing he impac o in e na ionaliza ion on hei social and
inancial pe o mance.
Ou s udy is mo i a ed by Alon e al.'s (2020) call o explo e how in e na ionaliza ion a ec s he ade-o be ween hyb id o ga-
niza ions' dual goals (W y and Zhao, 2018), and he au ho s' ecommenda ion o le e age in e na ional business heo ies. We a gue
ha analyzing in e na ional in luence h ough he lens o liabili y o o eignness heo y, a cen al heo y explaining he e ec o i m-
le el in e na ionaliza ion, can en ich ou unde s anding o he ad an ages and disad an ages o o eignness (Edman, 2016; Zahee ,
1995; Denk e al., 2012). Speci ically, le e aging he ad an ages o o eignness in hos coun ies can be ime-consuming and esou ce-
in ensi e due o he disad an ages o o eignness, such as lack o local knowledge, limi ed embeddedness, coo dina ion di icul ies,
and a el expenses (Schmid and So ka, 2009; Eden and Mille , 2004). The e o e, he concep o liabili y o o eignness allows us o
unde s and how o eignness a ec s hyb id o ganiza ions' dual pe o mance goals and how he impac o o eignness is mode a ed by
ac o s such as o ganiza ion size and enu e in he hos coun y.
Mo eo e , he in es iga ion o liabili y o o eignness in hyb id o ganiza ions is pa icula ly in e es ing due o he ension be ween
he social and inancial goals o such o ganiza ions (W y and Zhao, 2018). Fo eign hyb id o ganiza ions may o example mi iga e
adi ional aspec s o liabili y o o eignness such as lack o legi imacy and lack o embeddedness in he hos ma ke by gaining such
legi imacy and embeddedness h ough sa is ying social needs (Alon e al., 2020). On he o he hand, he social goal imposes highe
cos s on o eign hyb id o ganiza ions han on domes ic hyb id o ganiza ions since i equi es le e aging communi y-le el in o ma ion
and social ne wo ks in he hos ma ke , which a e ypically less accessible o o eign o ganiza ions (Chen e al., 2017). The e o e, he
in es iga ion o liabili y o o eignness in hyb id o ganiza ions can p o ide unique insigh in o he impac o o eignness on he ade-
o be ween social and inancial pe o mance.
I is no ewo hy ha , unlike domes ic hyb id o ganiza ions ha ha e oo s in he hos ma ke , o eign hyb id o ganiza ions mus
o e come liabili ies o o eignness such as lack o embeddedness, local knowledge, and legi imacy. These liabili ies o o eignness can
be pa icula ly ele an o hyb id o ganiza ions because hyb id o ganiza ions a e con ex -dependen o ganiza ions ha ha ness
communi y-le el in o ma ion, social ne wo ks, and embeddedness o pe o m hei ope a ions (Mai and Ma í, 2006; Dacin e al.,
2011). In addi ion, o eign hyb id o ganiza ions mus o e come he liabili y o o eignness ela ed o he p ocess o in e na ionali-
za ion. Speci ically, hyb id o ganiza ions, guided by he desi e o balance hei dual goals, do no necessa ily in e na ionalize in o
coun ies ha o e he highes inancial e u ns bu ins ead o en in e na ionalize in o low-income and ins i u ionally weak coun ies
wi h be e oppo uni ies o social e u ns (Me sland e al., 2020). Al hough domes ic hyb id o ganiza ions also mos ly ope a e in
ins i u ionally weak coun ies o he same eason, o eign hyb id o ganiza ions may expe ience a g ea e liabili y when ope a ing in
such a con ex . Speci ically, ins i u ionally weak coun ies a e cha ac e ized by weak ule o law, poo legal quali y, and co up ion,
and he e o e economic ela ionships end o be go e ned by social ela ionships a he han legal mechanisms (London and Ha ,
2004). Thus, liabili ies o o eignness such as un amilia i y wi h and lack o embeddedness in he hos coun y can be pa icula ly
daun ing in ins i u ionally weak con ex s, whe e hyb id o ganiza ions o en in e na ionalize. Fo hese easons, his pape explo es he
impac o liabili y o o eignness on hyb id o ganiza ions by compa ing he social and inancial pe o mance o o eign hyb id o -
ganiza ions wi h he social and inancial pe o mance o hei domes ic coun e pa s.
The global mic o inance indus y is a good empi ical con ex in which o examine liabili y o o eignness in o eign hyb id o -
ganiza ions. Pas esea ch has demons a ed ha mic o inance ep esen s a genuine hyb id business model ha couples social and
inancial logics (Ba ilana and Do ado, 2010). This unique hyb id model has a ac ed in e na ional in es o s who ha e es ablished, o
in es ed in, a la ge numbe o mic o inance ins i u ions since he 1980s (Reille e al., 2011). We u ilize a well- ecognized global da ase
o 655 mic o inance ins i u ions (MFIs) in 77 coun ies o e he pe iod 1998–2015. Fu he mo e, in his da ase , we can access
anspa en and high-quali y da a om hi d-pa y a ing agencies specializing in mic o inance (Beisland e al., 2014).
Ou esul s suppo he heo e ically mo i a ed a gumen , based on Zahee (1995), ha o eignness ha ms he pe o mance o
hyb id o ganiza ions. We ind ha mic o inance ins i u ions o o eign o igin ha e pa ly (i.e., he e ec is s a is ically signi ican only
in some models) lowe inancial and social pe o mance han MFIs o domes ic o igin. We also ound ha o eignness accoun s o pa
o he ade-o be ween he dual goals, as demons a ed by he pa ly educed inancial pe o mance o o eign o ganiza ions ela i e
o hei domes ic coun e pa o an inc ease in social pe o mance. The nega i e e ec o o eignness on inancial pe o mance is mo e
p onounced in o ganiza ions in ins i u ionally weak hos coun ies, bu i becomes pa ly weake as he size o he o ganiza ion in-
c eases. By con as , he nega i e e ec o o eignness on social pe o mance is independen o he ins i u ional quali y o he hos
coun y, bu i becomes pa ly weake as he size o he o ganiza ion and he leng h o enu e in he hos coun y inc ease. Addi ionally,
he o eignness- ela ed ade-o is pa ly s onge in la ge o ganiza ions, bu diminishes in o ganiza ions wi h longe enu e in he
hos coun y.
We con ibu e o he unde s anding o in e na ional hyb id o ganiza ions by using liabili y o o eignness heo y, a cen al heo y in
he in e na ional business li e a u e. Ou wo k p o ides e idence ha liabili y o o eignness lowe s he inancial and social pe o -
mance o o eign hyb id o ganiza ions. We also e eal ha liabili y o o eignness accoun s o pa o he ade-o be ween he dual
goals, wi h he nega i e e ec o o eignness on inancial pe o mance becoming mo e p onounced wi h an inc ease in social
3
Blended alue is a e m used o indica e he aim o ul illing bo h social and inancial goals (Eme son, 2003; Os e ag e al., 2021).
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
3
pe o mance. As hyb id o ganiza ions o en ope a e in coun ies wi h weak ins i u ions, we examine and unde sco e he mode a ing
ole o hos coun y ins i u ional quali y. We emphasize ha while he inancial pe o mance challenges o liabili y o o eignness is
mo e p onounced in ins i u ionally weak coun ies, liabili y o o eignness has no bea ing on he social pe o mance, ega dless o he
ins i u ional quali y o he hos coun y. Mo eo e , we ex end esea ch ha has shown he mode a ing ole o o ganiza ion size and
enu e on he e ec o o eignness on inancial pe o mance (Johanson and Vahlne, 1977, 2009; Bloms ¨
om and Lipsey, 1991; Henna ,
2007) by showing ha hese a iables pa ly also mode a e he e ec o o eignness on social pe o mance. Ou esea ch unde sco es
he signi icance o o ganiza ional enu e in he hos coun y, which plays an addi ional mode a ing ole in mi iga ing he ade-o
be ween social and inancial pe o mance a ising om o eignness in hyb id o ganiza ions. Concu en ly, we shed ligh on he dual
ole o o ganiza ion size, highligh ing i s nega i e mode a ing e ec on he o eignness- ela ed ade-o be ween social and inancial
pe o mance.
The es o he pape is o ganized as ollows. In Sec ion 2, we p esen he heo e ical backg ound, e iew he li e a u e, and
o mula e ou hypo heses. In Sec ion 3, we desc ibe he da a and me hodology. In Sec ion 4, we p esen he esul s, and, in Sec ion 5,
we discuss he implica ions. Sec ion 6 concludes.
2. Li e a u e and hypo hesis de elopmen
2.1. Theo e ical backg ound
The concep o liabili y o o eignness e e s o he disad an ages encoun e ed by o eign i ms compa ed o domes ic i ms in a hos
coun y. The concep , in oduced by Hyme (1976), is well-es ablished in he in e na ional business li e a u e. Speci ically, liabili y o
o eignness e e s o “all addi ional cos s a i m ope a ing in a ma ke o e seas incu s ha a local i m would no incu ” (Zahee , 1995,
p. 343). These cos s may be incu ed due o lack o domes ic ma ke in o ma ion, un amilia i y wi h he domes ic cul u al en i on-
men , di e en ial ea men due o hos - and home-coun y policy es ic ions, and geog aphical dis ance ba ie s ha en ail a el
cos s and coo dina ion cos s (Zahee , 1995; Zahee and Mosakowski, 1997).
Following he pionee ing wo k o Zahee (1995), se e al s udies demons a ed he e ec o o eignness in di e en indus ies (Denk
e al., 2012). Some no able examples a e he lowe X-e iciency o o eign banks (Mille and Pa khe, 2002), as well as he lowe
p o i abili y (Zahee , 1995) and lowe su i al a e (Zahee and Mosakowski, 1997) o o eign banks in ading ooms. Simila ly, in he
manu ac u ing sec o , pas s udies ha e shown ha liabili y o o eignness inc eases he likelihood o o eign a ilia es exi ing om a
hos coun y (Henna e al., 2002) and engaging in lawsui s (Mezias, 2002).
Ini ially, he no ion ha o eign i ms incu addi ional cos s compa ed o domes ic i ms was called he “cos o doing business
ab oad” (Hyme , 1976) and was only la e dubbed “liabili y o o eignness” (Zahee , 1995; Zahee and Mosakowski, 1997).
4
Howe e ,
subsequen esea ch has shown ha hese disad an ages o o eignness may be o se by ce ain ad an ages. Speci ically, in e nali-
za ion heo y emphasizes how in e na ional i ms exploi hei dis inc ad an ages (such as knowledge se s, human capi al, pa en s,
e c.) when c ossing na ional bo de s (Rugman and Ve beke, 2003; Eden and Mille , 2004).
Thus, when examining liabili y o o eignness, i is essen ial o look in o he ad an ages as well as he disad an ages o being a
o eign i m as opposed o a domes ic i m o achie e a nuanced unde s anding o he e ec o liabili y o o eignness on i m pe -
o mance (Edman, 2016; Zahee and Mosakowski, 1997).
2.2. Ad an ages and disad an ages o being a o eign i m and hei ele ance and uniqueness in a hyb id con ex
2.2.1. Ad an ages
In e na ional business esea ch on egula o -p o i i ms highligh s ha i ms c oss na ional bo de s o deploy hei i m-speci ic
ad an ages e icien ly (Rugman and Ve beke, 2003). Speci ically, in e naliza ion heo y esea ch explains ha o -p o i i ms c oss
na ional bo de s o dec ease he ansac ion cos s associa ed wi h deploying hei i m-speci ic ad an ages such as echnologies, know-
how, and o he simila in e media e p oduc s.
E iciency is s ill impo an in hyb id o ganiza ions because hyb id o ganiza ions aim no me ely o add ess social issues bu o do
so in a inancially sus ainable manne . Hence, hyb id o ganiza ions in e na ionalize o deploy i m-speci ic ad an ages ha can be
used o add ess ce ain social needs e icien ly (Zah a e al., 2008). These i m-speci ic ad an ages include ele an skills o supplying
social needs, access o in e na ional ne wo ks o in e na ional bes p ac ices, and inno a i e business models (Zah a e al., 2008; De
Beule e al., 2020; Me sland e al., 2011). Thus, hyb id o ganiza ions c oss na ional bo de s in o coun ies whe e social issues a e
ampan o e icien ly le e age hei unique ad an ages o sol ing such p oblems (Zah a e al., 2008). In his ega d, jus like o eign
o -p o i i ms, o eign hyb id o ganiza ions can adap hei i m-speci ic ad an ages o he hos ma ke (Ea ne e al., 2014; De Beule
e al., 2020).
Howe e , deploying i m-speci ic ad an ages ac oss bo de s o en comes wi h highe ixed cos s (Moen, 1999). Fo example, se ing
up echnologies, s anda dized sys ems, and p ocedu es o en en ails highe ixed cos s ha equi e he o ganiza ion o scale in o de o
sp ead he cos and eap he bene i (Henna , 2007). Howe e , gi en ha hyb id o ganiza ions o en in e na ionalize in o de eloping
coun ies, he ins i u ional con ex o he hos coun y (e.g., weak egula o y sys em, poli ical ins abili y, e c.) may make he
4
Al hough Hyme 's “cos o doing business ab oad” is b oade han Zahee 's “liabili y o o eignness,” bo h concep s e e o he ac ha o eign
i ms a e a a disad an age compa ed o domes ic i ms (Eden and Mille , 2001).
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
4
implemen a ion o i m-speci ic ad an ages cos ly (Ea ne e al., 2014). Mo eo e , since hyb id o ganiza ions a e locally embedded, a
sys em ha wo ks in one coun y may no wo k in ano he and hence may incu in e na ional adap a ion cos s (Chen e al., 2017).
Thus, o le e age i m-speci ic ad an ages (in e na ional alen , echnology, knowledge ans e , e c.), a o eign hyb id o ganiza ion
needs o scale i s o ganiza ion u he in o de o o se i s highe in es men cos s.
2.2.2. Disad an ages
In addi ion o explaining he ad an ages enjoyed by o eign o ganiza ions, esea ch has iden i ied he p ima y disad an age o a
o eign i m compa ed o a domes ic i m (Zahee , 1995; Angulo-Ruiz e al., 2020). As explained in Sec ion 1, hyb id o ganiza ions
ope a e wi h bo h social and inancial logics; hus, such o ganiza ions equi e no only i m-speci ic knowledge and esou ces bu also
social embeddedness in he hos coun y (Mai and Ma í, 2006; Chen e al., 2017). Collabo a ion and alliances wi h domes ic playe s
and bene icia ies a e means o gaining local in o ma ion and legi imacy and, as such, a e i al o he c ea ion o social alue (Ha and
Sha ma, 2004; London and Ha , 2004). The con ex -dependen na u e o hyb id o ganiza ions implies ha he disad an ages o
o eignness such as lack o hos -coun y in o ma ion, embeddedness, and legi imacy a e o midable. Indeed, hese disad an ages can
esul in subs an ial cos s o o eign hyb id o ganiza ions in he hos coun y.
On he o he hand, liabili y o o eignness in hyb id o ganiza ions is pa icula ly unique due o he ension and ade-o be ween
he dual goals o social and inancial pe o mance, whe e one goal may be achie ed a he expense o he o he goal (W y and Zhao,
2018). Mos impo an ly, he social goal deli e s social alue o he local communi y; hus, i is an ongoing sou ce o legi imacy
(Sinko ics e al., 2014). The social goal is also g ea ly alued by local pa ne s such as coope a i es and ci il socie y o ganiza ions;
hus, i can be an essen ial means o connec ing wi h local playe s (London and Ha , 2004; London e al., 2010). Mo eo e , he social
goal en ails he in ol emen o bo h consume s and local playe s, which is i al o gaining local ma ke in o ma ion. In a nu shell, he
social goal is an essen ial means o dec easing liabili y o o eignness by way o inc easing legi imacy, connec ions, and local ma ke
in o ma ion. Fo eign hyb id o ganiza ions ha no mally lack legi imacy, connec ions, and local ma ke in o ma ion can p io i ize
hei social goal a he expense o hei inancial goal. The e o e, liabili y o o eignness is no necessa ily mani es ed in he same way
in ela ion o he wo goals because i can dec ease inancial pe o mance while inc easing social pe o mance.
Indeed, o eign hyb id o ganiza ions aim o achie e highe social pe o mance han domes ic hyb id o ganiza ions o mi iga e
liabili y o o eignness. This does no mean ha o eign hyb id o ganiza ions do no expe ience liabili y o o eignness in achie ing
social pe o mance. Gi en ha high social pe o mance is essen ial o dec easing liabili y o o eignness, o eign hyb id o ganiza ions
may s a egically ocus on social pe o mance by ading-o be ween he wo goals. Howe e , achie ing social pe o mance can be
daun ing o o eign compa ed o domes ic hyb id o ganiza ion due o liabili y o o eignness. As a esul , a uni inc ease in social
pe o mance can impose a highe inancial pe o mance challenges o o eign compa ed o domes ic hyb id o ganiza ions.
To see his, conside ha o eign hyb id o ganiza ions lack hos -coun y oo s; acco dingly, hey lack local ma ke in o ma ion and
he amilia i y needed o a ain social pe o mance (Angulo-Ruiz e al., 2020). By con as , domes ic hyb id o ganiza ions ha e hos -
coun y oo s; acco dingly, hey can easily unde s and cus ome s' needs and access he domes ic esou ces needed o achie e social
pe o mance. Thus, he cos o achie ing social pe o mance is highe o o eign hyb id o ganiza ions han o hei domes ic
coun e pa s.
Fu he mo e, social issues ha a e ine ec i ely deal wi h by a go e nmen o en d i e he widesp ead es ablishmen o o eign and
domes ic hyb id o ganiza ions in ins i u ionally weak coun ies (Zah a e al., 2008). Ins i u ionally weak coun ies c ea e a g ea e
need o add ess social issues (Tashman e al., 2019), bu , a he same ime, hey a e mo e suscep ible o liabili y o o eignness p ecisely
because o hose ins i u ional oids. In his ega d, he ins i u ional quali y o he hos coun y po en ially in e ac s wi h liabili y o
o eignness.
In ins i u ionally weak coun ies, ins i u ional oids such as weak ule o law, poo legal quali y, and co up ion o ce business
ela ionships o be go e ned by social a he han legal go e nance mechanisms (Khanna and Ya eh, 2007; De So o, 2000). Thus,
ge ing ine-g ained insigh in o consume needs, se ices, and p oduc s ema kably equi es embeddedness in he local con ex
(London e al., 2010; London and Ha , 2004). As a esul , o eign o ganiza ions can ace subs an ial challenges o in o ma ion
asymme y due o a lack o embeddedness and be exposed o highe cos s due o liabili y o o eignness.
No wegian-based Alliance Mic o inance, a hyb id o ganiza ion ha expanded in o Libe ia in 2015, is a good example. Acco ding o
in e iews we conduc ed wi h he CEO in No way as well as he o eign CEO in Libe ia, he lack o hos -coun y in o ma ion was a
c ucial challenge o he o ganiza ion, pa icula ly in a less de eloped and ins i u ionally weak coun y like Libe ia. As a esul o his
lack o hos -coun y in o ma ion, Alliance Mic o inance se up i s i s main o ice in Libe ia in a subop imal loca ion a away om
whe e i s a ge clien s we e loca ed. This u he exposed he o ganiza ion o un o eseen and signi ican ly high s a -up cos s.
On he o he hand, he social goal makes a g ea e ma ginal con ibu ion o socie y when unde lying social p oblems a e ampan
(Sinko ics e al., 2014). In coun ies bese by social p oblems, he social goal is an impo an means o o ganiza ional success since people
and pa ne o ganiza ions seldom accep , le alone suppo , o ganiza ions ha do no pu sue a social goal (Sinko ics e al., 2014: London
e al., 2010). In his ega d, he social goal can be an e en mo e decisi e means o gaining legi imacy and embeddedness in he local
ma ke in ins i u ionally weak coun ies han in ins i u ionally s ong coun ies. Thus, o eign hyb id o ganiza ions acing challenges o
legi imacy and embeddedness may ollow a s a egy o achie ing high social pe o mance a he expense o inancial pe o mance.
2.3. Hypo heses
Based on he heo e ical a gumen s p esen ed in Sec ions 2.1 and 2.2, we o mula e he ollowing hypo heses o guide ou analysis
o liabili y o o eignness in o eign hyb id o ganiza ions.
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
5
2.3.1. Financial pe o mance, social pe o mance, and he o eignness ade-o
2.3.1.1. Financial pe o mance. Hyb id o ganiza ions a e commonly ini ia ed by impac in es o s who aim o combine social and
inancial pe o mance as he co e goal (Ma shall, 2011; Chen, 2012). O en, impac in es o s om he global No h (de eloped
coun ies) ini ia e o eign hyb id o ganiza ions in he global Sou h (de eloping coun ies) (Zah a e al., 2008; Cull e al., 2015). Like
egula o -p o i o ganiza ions ope a ing in such se ings, hese hyb id o ganiza ions ace a ious liabili ies o o eignness. Following
Zahee (1995), we a gue ha un amilia i y wi h local condi ions and heigh ened communica ion, anspo a ion, and coo dina ion
p oblems can esul in highe adminis a i e cos s and lowe inancial pe o mance in o eign hyb id o ganiza ions han in domes ic
hyb id o ganiza ions. In pa icula , a o eign hyb id o ganiza ion ha ing limi ed social embeddedness in a hos coun y can incu
signi ican cos s due o he con ex ual na u e o i s ac i i y.
While o eign hyb id o ganiza ions possess compe i i e ad an ages ha suppo hei in e na ionaliza ion, hey s ill ace sub-
s an ial cos s when i comes o adap ing hese ad an ages o he hos con ex . This p ocess can be esou ce-in ensi e and ime-
consuming, due o o eign hyb id o ganiza ion limi ed embeddedness and knowledge o he hos coun y, as well as hei coo dina-
ion and a el expenses, which a e especially salien in hese con ex -dependen hyb id o ganiza ions. Hence, he di ec impac o
hese cos s can be subs an ial e en i hey can be po en ially a enua ed h ough o ganiza ional lea ning o e ime and wi h o gani-
za ional scaling.
The e o e, we p opose he ollowing hypo hesis:
Hypo hesis 1-A. Fo eign hyb id o ganiza ions, on a e age, ha e lowe inancial pe o mance han domes ic hyb id o ganiza ions.
2.3.1.2. Social pe o mance. Resea ch indica es ha a aining social goals equi es social capabili y, i.e., he capabili y o le e aging
in e nal and ex e nal communi y ela ionships (Teegen e al., 2004; Ta e and Bals, 2016). Hyb id o ganiza ions ha aim o each ou o
he lowe -income segmen s o socie y need o ha ness communi y-le el in o ma ion and social ne wo ks, which a e ypically less
accessible o o eign o ganiza ions (Chen e al., 2017). In his ega d, domes ic hyb id o ganiza ions ha e a s onge local connec ion
wi h local communi y g oups and leade s han o eign hyb id o ganiza ions (Yang and Wu, 2015). Thei local oo s help domes ic
hyb id o ganiza ions o unde s and cus ome s' needs and o gain he legi imacy and local esou ces needed o achie e social pe -
o mance (Dacin e al., 2011). By con as , o eign hyb id o ganiza ions wi h limi ed local oo s lack he local in o ma ion, amilia i y
wi h local condi ions, and legi imacy needed o a ain social pe o mance (Angulo-Ruiz e al., 2020). These liabili ies can hinde he
social pe o mance o o eign hyb id o ganiza ions compa ed o domes ic hyb id o ganiza ions.
On he lip side, o eign hyb id o ganiza ions could b ing along compe i i e ad an ages such as p o en manage ial sys ems,
inno a i e business models, and access o in e na ional alen om hei in e na ional ne wo ks o expe ience (De Beule e al., 2020).
Al hough localizing hese ad an ages may come a high cos s, he ad an ages can imp o e he social pe o mance o o eign hyb id
o ganiza ions compa ed o domes ic ones. Mo eo e , hese ad an ages o o eignness can exe a subs an ial in luence on he s a egic
decisions o o eign hyb id o ganiza ions. As long as hese o ganiza ions main ain a iable le el o inancial sus ainabili y, hey may
p io i ize social pe o mance by le e aging hei unique i m-speci ic ad an ages. Indeed, he di ec impac on social pe o mance may
no be subs an ial o immedia ely ully appa en , gi en ha adap ing he ad an ages o he hos con ex akes ime.
A he same ime, i is impo an o no e ha social pe o mance gene a es social alue wi hin he hos coun y, as shown in he
wo ks o Alon e al. (2020) and Ma uyama and Wu (2015). This implies ha a s ong commi men o social objec i es e lec s he
o ganiza ion's dedica ion o con ibu ing o and add essing he conce ns o he hos coun y. Thus, as no ed by Sinko ics e al. (2014)
and Ma uyama and Wu (2015), he social goal is essen ial o gaining legi imacy and connec ions in he hos coun y. Social pe -
o mance also en ails ac i e engagemen wi h consume s and local s akeholde s (Sunda amu hy e al., 2013; Ha and Sha ma, 2004).
Hence, a s ong commi men o social goals os e s deepe connec ions wi h local s akeholde s and acili a es ga he ing aluable local
ma ke knowledge (London and Ha , 2004; Mi hani, 2017). In summa y, achie ing highe social objec i es collec i ely se es as a
aluable s a egy o add essing he challenges posed by liabili y o o eignness, such as limi ed legi imacy, embeddedness, and a-
milia i y in he hos coun y (Sinko ics e al., 2014; Ma uyama and Wu, 2015). While liabili y o o eignness de e s social pe o mance,
social pe o mance is an essen ial means o dec easing liabili y o o eignness (Sinko ics e al., 2014; Ma uyama and Wu, 2015; Alon
e al., 2020).
Speci ically, wi hin he con ex o ou s udy, people and po en ial pa ne o ganiza ions ha e social pe o mance expec a ions o
hyb id o ganiza ions as social pe o mance is one o he wo goals o hyb id o ganiza ions. Hence, o eign hyb id o ganiza ions mus
demons a e hei commi men o social pe o mance as one o hei undamen al dual goals bu also o a high deg ee ha can allow
hem o gain he legi imacy and accep ance, hey lack in he hos coun y.
We a gue ha o eign hyb id o ganiza ions can achie e high social pe o mance due o he possibili y o a ade-o be ween he
wo goals. To he ex en ha a o ing one o he goals o e he o he goal acili a es be e long- e m dual pe o mance, a ade-o can
be a a ional s a egic decision. Fo his eason, o eign hyb id o ganiza ions uphold high social pe o mance since a social goal can
help hem o e come hei liabili y o o eignness obs acles and he eby g adually imp o e hei dual pe o mance.
The e o e, we p opose he ollowing hypo hesis:
Hypo hesis 1-B. Fo eign hyb id o ganiza ions, on a e age, ha e highe social pe o mance han domes ic hyb id o ganiza ions.
2.3.1.3. The o eignness ade-o . E en i o eign hyb id o ganiza ions need o achie e highe social pe o mance o mi iga e liabili y
o o eignness, a aining social pe o mance can be mo e challenging o o eign hyb id o ganiza ions han o domes ic hyb id
T.W. Sommeno e al.
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6
o ganiza ions. This is due o liabili y o o eignness ba ie s o social pe o mance. As a esul , al hough o eign hyb id o ganiza ions
uphold high social pe o mance, each uni inc ease in social pe o mance dec eases mo e he inancial pe o mance o o eign hyb id
o ganiza ions compa ed o domes ic hyb id o ganiza ions in he hos coun y.
To see his, no e ha o eign hyb id o ganiza ions ypically ha e limi ed knowledge o he local social con ex and limi ed
embeddedness in he local ma ke (Yang and Wu, 2015). Ye , p ecisely such knowledge and embeddedness a e equi ed in o de o
o eign hyb id o ganiza ions o acqui e esou ces such as in o ma ion, p oduc s, labo , e c. needed o each he ma ginalized segmen
o socie y (Ta e and Bals, 2016). In o he wo ds, o eign hyb id o ganiza ions equi e a la ge amoun o esou ces o adap o he hos -
coun y con ex and, he e o e, adop a s a egy o deepening social pe o mance ailo ed o he speci ic con ex o he hos coun y
(Ambos e al., 2020). As a esul , a high social pe o mance o ien a ion can be associa ed wi h a highe inancial cos o o eign hyb id
o ganiza ions han o domes ic hyb id o ganiza ions in a gi en hos ma ke . This sugges s ha he o eign hyb id o ganiza ion's le el
o social pe o mance in e ac s wi h he e ec o o eignness on inancial pe o mance.
Hypo hesis 1-C. An inc ease in social pe o mance inc eases he nega i e e ec o o eignness on inancial pe o mance.
2.4. Mode a ing e ec s
2.4.1. The hos -coun y ins i u ional con ex
As men ioned ea lie , o eign in es o s and dono s ypically es ablish hyb id o ganiza ions o add ess ampan social needs in
eme ging ma ke s. In eme ging ma ke s, hese o ganiza ions ace egula o y sys ems and o mal con ac en o cemen mechanisms
ha a e unde eloped (Khanna and Ya eh, 2007). O en, he ins i u ional sys ems o eme ging ma ke s a e weak in ha con ac ual
ag eemen s a e en o ced p ima ily by social and no legal go e nance mechanisms, and in o mal social ela ionships play a p e-
dominan ole in o mal legal p ocedu es (De So o, 2000). Thus, compa ed o hei domes ic coun e pa s, o eign hyb id o ganiza ions
a e ma kedly less amilia wi h and embedded in he hos coun y since hey commonly do no ha e a well-es ablished ne wo k o
ela ionships wi h domes ic social ins i u ions (Webb e al., 2010; Van den waeyenbe g and Hens, 2012). Hence, we a gue ha liabili y
o o eignness is mo e p onounced in ins i u ionally weak coun ies.
Acco ding o London and Ha (2004), economic, social, cul u al, and en i onmen al ac o s a e highly in e wined in less
de eloped and ins i u ionally weak coun ies. As a esul , i ms wi hou su icien unde s anding o he ins i u ional con ex and
wi hou embeddedness in he domes ic social ne wo k canno be expec ed o mee he challenge o o e coming liabili y o o eignness
(London and Ha , 2004; Schus e and Hol b ügge, 2012). This challenge is pa icula ly daun ing o o eign hyb id o ganiza ions
ini ia ed in he global Sou h (de eloping coun ies) by in es o s om he global No h (de eloped coun ies) (Zah a e al., 2008; Cull
e al., 2015).
The e o e, we p opose he ollowing hypo hesis:
Hypo hesis 2-A. The nega i e e ec o o eignness on inancial pe o mance is mo e p onounced in ins i u ionally weak coun ies.
On he o he hand, since unde lying social p oblems a e mo e isible in ins i u ionally weak coun ies, people and po en ial pa ne
o ganiza ions in hose coun ies g ea ly alue he social goal. As a esul , he social goal conside ably helps o eign hyb id o gani-
za ions o connec wi h local playe s and gain legi imacy in he local ma ke (Sinko ics e al., 2014). In ac , connec ions wi h local
playe s and legi imacy a e pa icula ly essen ial in ins i u ionally weak coun ies due o ins i u ional oids such as weak ule o law
and poo legal mechanisms, whe e con ac ual ag eemen s and business ela ions a e go e ned mo e by social han by legal mech-
anisms. Mo eo e , as explained abo e, connec ions wi h local playe s and legi imacy a e also essen ial in o de o o eign o gani-
za ions o o e come liabili y o o eignness (Zahee , 1995; Zahee and Mosakowski, 1997). Hence, o eign hyb id o ganiza ions may
adop a s a egy o achie ing high social pe o mance o gain local connec ions and legi imacy in he hos coun y. Fo hese easons,
o eign hyb id o ganiza ions ha app oach ins i u ionally weak coun ies may achie e be e social pe o mance han hei domes ic
coun e pa s.
The e o e, we p opose he ollowing hypo hesis:
Hypo hesis 2-B. The posi i e e ec o o eignness on social pe o mance is mo e p onounced in ins i u ionally weak coun ies.
2.4.2. Scaling
Resea ch has ecognized ha o eign i ms ha e a numbe o ad an ages ha may o se he disad an ages o o eignness (Se hi and
Judge, 2009; De Beule e al., 2020). As explained in Sec ion 2.2, hese ad an ages include, among o he hings, ad anced manage ial
sys ems, in e na ional bes p ac ices, and access o in e na ional alen (Me sland e al., 2011; De Beule e al., 2020). These ad an ages
a e essen ial o ad ancing p oduc de elopmen and p oduc i i y, which a e c ucial o bo h social and inancial pe o mance (De
Beule e al., 2020).
None heless, ans e ing he ad an ages om he home coun y o he hos coun y can be cos ly and equi e scaling (Bloms ¨
om and
Lipsey, 1991; Henna , 2007; Ea ne e al., 2014). Speci ically, adap ing hese i m-speci ic ad an ages o he speci ic con ex o he hos
coun y in ol es cos s ela ed o liabili y o o eignness such as highe a el and coo dina ion cos s. Mos o hese cos s a e also ixed
(Ca es and Ca es, 1996; Se hi and Guisinge , 2002). A e all, hyb id o ganiza ions engage in con ex ually con ingen ac i i ies (Dacin
e al., 2011), which make o e ing s anda dized p oduc s in he hos ma ke daun ing. The e o e, adap ing he ad an ages o he speci ic
con ex o he hos coun y can en ail high ixed cos s (De Beule e al., 2020). Fo o eign hyb id o ganiza ions acing such disad an ages,
size ma e s because scaling can lowe he pe -uni cos o ans e ing he ad an ages om he home coun y and adap ing hem o he
hos con ex . O ganiza ion size can he eby alle ia e he impac o liabili y o o eignness on inancial pe o mance.
T.W. Sommeno e al.
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7
Mo eo e , gi en ha o ganiza ion size helps o con ain he pe -uni cos o ans e ing he i m-speci ic ad an ages o he hos
con ex , o eign hyb id o ganiza ions can be e le e age hei i m-speci ic ad an ages a la ge o ganiza ion size han smalle o -
ganiza ions size. Thus, compa ed o domes ic hyb id o ganiza ions, o eign hyb id o ganiza ions imp o e mo e hei social and
inancial pe o mance as he size o he o ganiza ion inc eases. This is because he i m-speci ic ad an ages o o eign o ganiza ions
adop ed a la ge o ganiza ions size enable hem o p oduc i ely add ess social issues (De Beule e al., 2020). Fo example, when
ad an ages such as in e na ional bes p ac ices and inno a i e business models a e well adap ed o he hos -coun y con ex , i in-
c eases he compe i i e posi ions o o eign hyb id o ganiza ions compa ed o domes ic hyb id o ganiza ions in achie ing bo h social
and inancial pe o mance.
On he o he hand, o ganiza ion size inc eases he isibili y o he o ganiza ions in he hos coun y (Eden and Mille , 2004). Thus,
as o ganiza ion size inc eases, o eign compa ed o domes ic hyb id o ganiza ions a e o en mo e p essu ed o imp o e hei social
pe o mance in o de o main ain hei legi imacy in he hos coun y.
Fu he mo e, he li e a u e ela es scaling o inancial s eng h (Eden and Mille , 2004), and in e ac ion wi h a di e se se o
s akeholde s (Ha and Sha ma, 2004), all o which open up possibili ies o ga ne ing domes ic ma ke in o ma ion. Thus, la ge
o ganiza ion size can mi iga e he e ec o liabili y o o eignness on hei social and inancial pe o mance.
In addi ion, as o ganiza ions scale, he o eign hyb id o ganiza ion's inc eased access o communi y-le el in o ma ion and ne wo ks
can mi iga e hei lowe inancial pe o mance encoun e ed o a uni inc ease in social pe o mance compa ed o hei domes ic
coun e pa . This imp o emen in he o eignness- ela ed ade-o can also occu because scaling allows o eign hyb id o ganiza ions
o e ec i ely implemen and le e age hei s a egies o enhancing social pe o mance wi hin he speci ic con ex o he hos coun y.
Consequen ly, in la ge o ganiza ions, o eign compa ed o domes ic hyb id o ganiza ions can imp o e hei lowe inancial pe o -
mance associa ed wi h an inc ease in social pe o mance by le e aging hei i m-speci ic ad an ages, communi y-le el in o ma ion,
and ne wo ks. As a esul , he in e ac ion e ec be ween o eignness and social pe o mance has a mo e p onounced nega i e e ec on
inancial pe o mance in smalle hyb id o ganiza ions bu no in la ge hyb id o ganiza ions.
In his ega d, we p opose he ollowing hypo heses:
Hypo hesis 3-A. An inc ease in he size o he o ganiza ion dec eases he nega i e e ec o o eignness on inancial pe o mance.
Hypo hesis 3-B. An inc ease in he size o he o ganiza ion inc eases he posi i e e ec o o eignness on social pe o mance.
Hypo hesis 3-C. An inc ease in social pe o mance inc eases he nega i e e ec o o eignness on inancial pe o mance, such ha
he nega i e e ec diminishes in la ge o ganiza ions.
2.4.3. O ganiza ion enu e in he hos ma ke
In line wi h Johanson and Vahlne's (1977, 2009) and Zahee and Mosakowski's (1997) classic s udies on he e ec o lea ning on
o -p o i i ms, i is easonable o expec a simila e ec o lea ning on o eign hyb id o ganiza ions. Speci ically, lea ning occu s as he
o eign hyb id o ganiza ion accumula es in o ma ion abou , gains amilia i y wi h, and becomes embedded in he new ma ke . Hence,
i is likely ha he lea ning o a hyb id o ganiza ion mi iga es he e ec o liabili y o o eignness on inancial and social pe o mance.
As he liabili y o o eignness is educed wi h a longe o eign hyb id o ganiza ion's enu e in he hos coun y, we expec a educed
need o o eign hyb id o ganiza ions o use social pe o mance as a means o gaining legi imacy and ge ing access o impo an
s akeholde s. Howe e , we do no comple ely discoun he po en ial ha o eign hyb id o ganiza ions may le e age social pe o -
mance as a means o gaining o main aining legi imacy and connec ion in he hos coun y, because liabili y o o eignness may no
en i ely disappea o e ime.
On he o he hand, as a o eign hyb id o ganiza ion's enu e in a hos coun y inc eases, i gains g ea e amilia i y, legi imacy, and
embeddedness in he hos ma ke (Johanson and Vahlne, 2009). Consequen ly, he o eign compa ed o he domes ic hyb id o ga-
niza ion's lowe inancial pe o mance encoun e ed o an inc ease in social pe o mance can imp o e o e ime. This imp o emen
wi h ime can also occu because he o eign hyb id o ganiza ion combine be e i s i m-speci ic ad an ages in he hos con ex ,
building a ne wo k and knowledge base wi hin he hos coun y o e ime.
Simila ly, he social pe o mance o o eign hyb id o ganiza ions compa ed o hei domes ic coun e pa s can also imp o es o e
longe enu e o he wo easons. Fi s , o eign hyb id o ganiza ions in he hos coun y may achie e hei social pe o mance goal
mo e easily due o he ac ha liabili y o o eignness dec eases o e ime. Second, o eign hyb id o ganiza ions may le e age hei
i m-speci ic ad an ages (e.g., knowledge ans e , echnology and, in e na ional alen ) ha ha e been e ec i ely deployed in he
hos coun y o e ime, he eby imp o ing hei social pe o mance mo e han ha o hei domes ic coun e pa s.
The e o e, we p opose he ollowing hypo heses:
Hypo hesis 4-A. An inc ease in he leng h o enu e in he hos coun y dec eases he nega i e e ec o o eignness on inancial
pe o mance.
Hypo hesis 4-B. An inc ease in he leng h o enu e in he hos coun y inc eases he posi i e e ec o o eignness on social
pe o mance.
Hypo hesis 4-C. An inc ease in social pe o mance inc eases he nega i e e ec o o eignness on inancial pe o mance, such ha
he nega i e e ec diminishes in he la e yea s o he o ganiza ion's enu e in he hos coun y.
T.W. Sommeno e al.
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8
3. Da a and me hod
3.1. Con ex
The mic o inance indus y is a ele an con ex o his s udy o se e al easons. Fi s , he mic o inance business model is a
p ominen hyb id model, p o iding inancial se ices o popula ions excluded om he con en ional inancial sec o (Ba ilana and
Do ado, 2010). A he end o 2018, mic o inance ins i u ions (MFIs) globally epo ed o Mic o inance Ba ome e ha hey had
p o ided mic oloans o >139 million indi iduals (Mic o inance Ba ome e , 2019).
Second, in e na ional in es o s ha e been ac i ely engaged in es ablishing new MFIs in a ious o eign coun ies (Cull e al., 2015).
Reille e al. (2011) epo ha a ound hal o he in es men s o o eign de elopmen inance ins i u ions a e ea ma ked o he
es ablishmen o g een ield mic o inance ins i u ions. An impo an ea u e o a g een ield MFI is ha a holding company (i.e., he
in e na ional in es o s) plays a cen al ole in i s c ea ion and a ious aspec s o i s ope a ion (Ea ne e al., 2014). This makes
g een ield MFIs a pa icula ly a ac i e empi ical con ex in which o es liabili y o o eignness in a hyb id se ing.
Mo eo e , mos in e na ional g een ield MFIs a e es ablished in de eloping coun ies by in es o s om de eloped coun ies.
5
As a
esul , he ins i u ional and cul u al he e ogenei y be ween he home and hos coun ies is no mally high. These home- s. hos -
coun y dispa i ies a e consis en wi h he li e a u e on he in e na ionaliza ion o hyb id o ganiza ions (e.g., Zah a e al., 2008).
Thi d, he mic o inance indus y has anspa en and high-quali y da a as a esul o hi d-pa y a ing agency sc u iny and he push
o anspa en in o ma ion by in e na ional ins i u ional dono s, such as he Wo ld Bank mic o inance uni CGAP (Beisland e al.,
2014). This is a a e excep ion o he low quali y o da a on mos o he indus ies in eme ging ma ke s (Beisland e al., 2014).
3.2. Da a
To es ou hypo heses on he global mic o inance indus y, we use in o ma ion om MFIs a ed by a leas one o he op i e a ing
agencies specializing in mic o inance, namely, Mic oRa e, Mic o inanza, Plane Ra ing, CRISIL, and M-CRIL. In all, we ha e a sample
o 655 MFIs in 77 coun ies o he pe iod 1998–2015. Ou sample is well sui ed o s udying in e na ionaliza ion in mic o inance since
MFIs a e o en equi ed o unde go a hi d-pa y a ing when hey need in e na ional collabo a ion and unding. The e o e, he da ase
e lec s MFIs ha a e in e na ionally o ien ed and anspa en , i.e., willing o le a hi d pa y e iew hei business p ac ices and
pe o mance. The da ase is an up- o-da e e sion o he da ase used in nume ous p e ious s udies (e.g., Me sland e al., 2011;
Ha a ska e al., 2013; Goleso khi e al., 2019a).
The da ase has se e al ad an ages o e o he da ase s o en used in mic o inance esea ch, such as he MIX Ma ke da ase (www.
mixma ke .o g). Fi s , he da ase con ains mo e in o ma ion ha is pa icula ly pe inen o ou s udy, such as in o ma ion on he
in e na ional ea u es o MFIs. Second, he da ase is hand-collec ed and e i ied by a hi d-pa y a ing agency and no sel - epo ed by
MFIs, as is he case wi h he MIX Ma ke da ase . Thi d, he da ase has less o a la ge-MFI bias han he MIX Ma ke da ase (Goleso khi
e al., 2019b). To acili a e compa isons, he da a en y on ele an a iables has been dolla ized and annualized using he o icial
exchange a e a he ime.
To analyze he da a, we i s p esen summa y s a is ics o he a iables used in he s udy. We hen conduc a wo-way compa ison
o o eign and domes ic MFIs. Finally, we un mul iple eg ession analyses o con ol o con ounding ac o s ha can c ea e sys emic
di e ences be ween he wo g oups.
Since ou wo pe o mance a iables ( he dependen a iables o social and inancial pe o mance) a e likely o be in e dependen ,
we use a seemingly un ela ed eg ession (SUR) model ha allows o he co ela ion o e o s be ween equa ions (Zellne , 1962). In
his in e dependen pe o mance a iables con ex , he SUR model p o ides mo e e icien es ima es han sepa a e leas squa es es-
ima es (Zellne , 1962). The gene al o m o ou model is hus as ollows:
Mic o inance pe o mance = ( o eign MFI, o eign MFI and social pe o mance,
6
o eign MFI and ins i u ional quali y o he hos
coun y, o eign MFI and MFI size, o eign MFI and MFI enu e, con ol a iables,
ε
).
3.3. Measu es o dependen and independen a iables
We measu e inancial pe o mance in e ms o inancial sus ainabili y and cos indica o s. Fi s , since we a e ocusing on a hyb id
indus y, whe e bo h clien sa is ac ion and inancial e u n o in es o s and dono s a e impo an , we see a need o look a bo h
inancial sus ainabili y and cos s. In ma ke s wi h pe ec compe i ion, he cos side does no ma e , bu in ma ke s wi h impe ec
compe i ion, such as in mos mic o inance ma ke s, add essing he cos side becomes necessa y (McIn osh and Wydick, 2005). Spe-
ci ically, in ma ke s wi h impe ec compe i ion, MFIs can easily ans e high ope a ional cos s o clien s h ough high-in e es a es
while s ill main aining a high le el o inancial sus ainabili y (Hudon and Ash a, 2013). Second, minimizing cos is an essen ial
ope a ional objec i e o hyb id o ganiza ions o ensu e hei inancial sus ainabili y. Thi d, highe social pe o mance can po en ially
5
Examples o in es o s o MFIs om de eloping coun ies es ablishing g een ield MFIs in o he de eloping coun ies a e uncommon. A no able
excep ion is he Bangladeshi MFI BRAC, which es ablished g een ield MFIs in Uganda, Libe ia, and se e al o he low-income coun ies (Reille e al.,
2011).
6
The in e ac ion e m “ o eign MFI and social pe o mance” is conside ed only in he inancial pe o mance eg ession o examine he con in-
gency o he cos impac o o eignness on social pe o mance.
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
15
ope a ing expense a io o domes ic MFIs ( ow 1 o column (2)). The esul s pa ly suppo Hypo hesis 1-A ha , on a e age, he
inancial pe o mance o o eign MFIs is lowe han ha o hei domes ic coun e pa s in he hos coun y.
On he o he hand, he esul s in Table 4 show ha o eign MFIs a e no signi ican ly di e en om domes ic MFIs in eaching low-
income g oups ( ow 1 o column (3)).
12
Howe e , on a e age, o eign MFIs se e a s a is ically signi ican ly (p <0.1) lowe numbe o
clien s compa ed o domes ic MFIs (column (4)), pa ially con adic Hypo hesis 1-B, and indica e ha he social pe o mance o
o eign MFIs is pa ly lowe han ha o hei domes ic coun e pa s. These esul s also di e om he simple wo-sample - es shown
in desc ip i e Table 3. The di e ence a ises because he wo-sample - es p esen s only he social pe o mance di e ence be ween
o eign and domes ic MFIs wi hou con olling o he in luence o all o he co a ia es.
13
The esul s p esen ed in Table 4 (speci ically, ows 2–3 o columns (1)–(2)) indica e he e ec o he in e ac ion be ween social
pe o mance and o eignness on inancial pe o mance. When social pe o mance dec eases (as measu ed by highe a e age loan size),
a o eign MFI compa ed o a domes ic MFI does no show a signi ican di e ence in inancial pe o mance ( ow 2 o columns (1)–(2)).
Con e sely, hese esul s imply ha a uni inc ease in social pe o mance, measu ed by a lowe a e age loan size, does no signi ican ly
inc ease he nega i e e ec o o eignness on inancial pe o mance. Howe e , when we measu e social pe o mance by numbe o
clien s eached, an inc ease in social pe o mance signi ican ly (p <0.05) educes he inancial sus ainabili y o o eign MFIs compa ed
o domes ic MFIs, pa ly in line wi h Hypo hesis 1-C.
Fu he mo e, he esul s epo ed in Table 4 ( ow 4 o columns (1)–(4)) indica e he mode a ing e ec o he hos coun y's
ins i u ional quali y on he ela ionship be ween o eignness and pe o mance. Ce e is pa ibus, o each uni inc ease in he hos
coun y's ins i u ional quali y, a o eign MFI compa ed o a domes ic MFI signi ican ly inc eases i s OSS by 0.05 poin s (p <0.05) ( ow
4 o column (1)) and signi ican ly dec eases i s ope a ing expense by 3.0 pe cen age poin s (p <0.01) ( ow 4 o column (2)). The esul s
con e sely imply ha he nega i e e ec o o eignness on inancial pe o mance inc eases due o he lowe ins i u ional quali y o he
hos coun y, suppo ing Hypo hesis 2-A. By con as , ow 4 o columns (3) and (4) show ha , ce e is pa ibus, he highe ins i u ional
quali y o he hos coun y does no signi ican ly inc ease a e age loan size (lowe ou each o low-income clien s) (column (3)) and
dec eases he numbe o clien s eached (ln_c edi _clien s) (column (4)) o o eign MFIs ela i e o hei domes ic coun e pa s. Thus,
he social pe o mance esul s do no suppo Hypo hesis 2-B.
Table 4 shows he mode a ing e ec o MFI size ( ow 5 o columns (1)–(2)). The in e ac ion be ween o eignness and MFI size has a
posi i e and signi ican (p <0.05) e ec on inancial sus ainabili y (OSS) bu does no ha e a signi ican e ec on he ope a ing
expense a io. The magni udes o he signi ican e ec obse ed on inancial sus ainabili y a e also economically impo an . Fo
example, o each 1 % inc ease in MFI size om i s mean, a o eign MFI imp o es i s inancial sus ainabili y by 0.05 % (calcula ed om
he mean inancial sus ainabili y o MFIs o o eign o igin), whe eas a domes ic MFI imp o es i s inancial sus ainabili y by only 0.01 %
(calcula ed om he mean inancial sus ainabili y o MFIs o domes ic o igin). Thus, he nega i e e ec o o eignness on inancial
pe o mance is pa ly mi iga ed as he MFI's size inc eases, consis en wi h Hypo hesis 3-A. Addi ionally, Table 4 ( ow 5 o column (3))
shows ha an inc ease in he size o he MFI does no signi ican ly mi iga e he e ec o o eignness on a e age loan size. Howe e , MFI
size signi ican ly (p <0.1) dec eases he e ec o o eignness on social pe o mance as measu ed by he la ge numbe o clien s
eached ( ow 5 o column (4)). Thus, he social pe o mance esul s pa ially suppo Hypo hesis 3-B.
Table 5 shows he e ec o he in e ac ion be ween social pe o mance and o eignness on small MFIs ( ows 2–3 o columns (1)–(2))
and la ge MFIs ( ows 2–3 o columns (3)–(4)). We ha e ca ego ized MFIs as small o la ge based on he median MFI size. In he case o
small MFIs, lowe social pe o mance (measu ed by a la ge a e age loan size) does no signi ican ly a ec he inancial sus ainabili y
o he ope a ional cos o o eign MFIs compa ed o domes ic MFIs in a hos coun y ( ows 2–3 o columns (1)–(2)). Con e sely, his
means ha wi hin he sample o smalle MFIs, highe social pe o mance does no signi ican ly a ec he inancial pe o mance o MFIs
o o eign o igin compa ed o hei domes ic coun e pa s in a hos coun y. Mo eo e , wi hin his smalle MFI sample, highe social
pe o mance, as measu ed by an inc ease in he numbe o clien s eached, does no signi ican ly a ec ei he he inancial sus ain-
abili y o he cos o o eign MFIs compa ed o domes ic MFIs. Howe e , in he sample o la ge MFIs, as epo ed in ow 3 o column
(3), an inc ease in social pe o mance as measu ed by he numbe o clien s eached signi ican ly (p <0.05) educes he inancial
sus ainabili y o o eign compa ed o domes ic MFIs. This con adic s Hypo hesis 3-C, which posi s ha he in e ac ion be ween
o eignness and social pe o mance has a signi ican nega i e e ec on inancial pe o mance in smalle o eign hyb id o ganiza ions
bu no in la ge ones. On he con a y, hese esul s sugges ha , a leas o some ex en , an inc ease in social pe o mance signi ican ly
wo sens he inancial pe o mance o o eign MFIs when compa ed o domes ic MFIs, in la ge MFIs and no in smalle MFIs sample.
Thus, i indica es ha o ganiza ion size no only does no mi iga e he nega i e o eignness- ela ed ade-o be ween social and
inancial pe o mance bu – in ac – agg a a es i .
Table 4, ow 6 shows esul s conce ning he mode a ing e ec o o ganiza ion enu e on he e ec s o o eignness in inancial
pe o mance (columns (1)–(2)) and social pe o mance (columns (3)–(4)), espec i ely. Wi h each addi ional yea o enu e in a hos
12
As we s a ed in Sec ion 3.3, a lowe a e age loan size indica es g ea e ou each o low-income clien s, he eby measu ing be e social
pe o mance.
13
When co a ia es such as he in e ac ion e ec s o o eignness wi h enu e and o eignness wi h he size o he MFI a e le uncon olled,
o eignness shows a pa ly signi ican inc ease in social pe o mance. Howe e , upon con olling o hese e ec s, as p esen ed in Table 4, we see
ha he di ec e ec o o eignness on social pe o mance becomes nega i e. As discussed in Lindne e al. (2020), his ull model, which accoun s
o all in e ac ion e ec s, is conside ed eliable because i p o ides unbiased coe icien es ima es o his di ec e ec by adjus ing o and he eby
elimina ing he in luence o all o he co a ia es. The lowe -o de models ha do no include con ols o all a iables a e a ailable upon eques
om he au ho s.
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
16
coun y, a o eign MFI compa ed o a domes ic MFI does no signi ican ly inc ease ei he i s inancial sus ainabili y (OSS) o dec ease
i s ope a ing expense. Hence, hese esul s do no suppo he mode a ing e ec o o ganiza ion enu e on he ela ionship be ween
o eignness and inancial pe o mance (Hypo hesis 4-A). By con as , wi h each addi ional yea o enu e in a hos coun y, a o eign
MFI compa ed o a domes ic MFI signi ican ly inc eases he numbe o c edi clien s i se es (p <0.05) ( ow 6 o column (4)). While
ow 6 o column (3) does no show a dec ease in a e age loan size as an icipa ed, he esul ega ding he numbe o c edi clien s
pa ially suppo s Hypo hesis 4-B. The e o e, o ganiza ion enu e in he hos coun y inc eases he social pe o mance o o eign MFIs
o some ex en compa ed o ha o hei domes ic coun e pa s.
Addi ionally, Table 5 shows he e ec o he in e ac ion be ween social pe o mance and o eignness in he ea ly yea s o he MFI's
enu e in he hos coun y ( ows 2–3 o columns (5)–(6)) and in he la e yea s o he MFI's enu e in he hos coun y ( ows 2–3 o
columns (7)–(8)). We di ide he ea ly and la e yea s o he MFI's enu e in he hos coun y by he median MFI enu e in he hos
coun y. In he ea ly yea s o he MFI's enu e in he hos coun y, low social pe o mance (as measu ed by la ge a e age loan size)
does no signi ican ly a ec he inancial sus ainabili y o o eign MFIs compa ed o domes ic MFIs ( ow 2 o column (5)). In he ea ly
yea s, low social pe o mance (as measu ed by la ge a e age loan size) signi ican ly (p <0.1) lowe s he ope a ing expenses o MFIs o
o eign o igin compa ed o he ope a ing expenses o MFIs o domes ic o igin ( ow 2 o column (6)). Con e sely, his means ha high
social pe o mance, as measu ed by smalle a e age loan size, signi ican ly inc eases he ope a ing expenses o MFIs o o eign o igin
compa ed o he ope a ing expenses o MFIs o domes ic o igin. Addi ionally, high social pe o mance, as measu ed by an inc ease in
he numbe o clien s eached, signi ican ly dec eases inancial sus ainabili y (p <0.1) bu does no signi ican ly a ec he ope a ing
expenses o MFIs o o eign o igin compa ed o MFIs o domes ic o igin ( ow 3 o columns (5)–(6)). Howe e , du ing he la e yea s o
an MFI's enu e in he hos coun y, an inc ease in social pe o mance, whe he measu ed by a smalle a e age loan size o a highe
numbe o clien s eached, does no signi ican ly a ec he inancial pe o mance o MFIs o o eign o igin compa ed o MFIs o do-
mes ic o igin. The e o e, a leas pa ly, he e ec o o eignness on inancial pe o mance signi ican ly in e ac s wi h social pe o -
mance only in he ea ly yea s and no in he la e yea s o an MFI's enu e in he hos coun y, consis en wi h Hypo hesis 4-C.
Some o he con ol a iables also yield consis en and in e es ing esul s in Tables 4–5. Fo example, MFIs in ins i u ionally s ong
hos coun ies ha e pa ially (i.e., s a is ically signi ican only in some models) lowe inancial and social pe o mance as indica ed by
highe ope a ing expenses and smalle numbe s o clien s. These esul s may be due o he cos o complying wi h ules and egula ions
in ins i u ionally s ong coun ies (Ahlin e al., 2011). MFIs ope a ing in de eloped coun ies (acco ding o he Human De elopmen
Index) a e also less e icien and each a smalle numbe o clien s, which may indica e ha he mic o inance business model i s bes in
de eloping coun ies (Ahlin e al., 2011).
5. Discussion
We ind ha he inancial pe o mance o o eign hyb id o ganiza ions is signi ican ly lowe han ha o domes ic hyb id o ga-
niza ions (Hypo hesis 1-A). In line wi h he heo e ical a gumen s o he li e a u e on o -p o i in e na ionaliza ion, his nega i e
e ec o o eignness on he inancial pe o mance o hyb id o ganiza ions can be a ibu ed o hei un amilia i y wi h local social
ne wo ks, as well as geog aphical and cul u al ba ie s (Zahee , 1995; Zahee and Mosakowski, 1997). Indeed, liabili y o o eignness
can ha e a nega i e inancial pe o mance e ec on hyb id o ganiza ions gi en ha he ope a ions o hyb id o ganiza ions a e
g ounded in local social ne wo ks and con ex , which a e less accessible o o eign hyb id o ganiza ions han o hei domes ic
coun e pa s. Addi ionally, he in e na ionaliza ion p ocess o hyb id o ganiza ions ypically ollows a mig a o y ou e om he global
No h (de eloped coun ies) o he global Sou h (de eloping coun ies), suppo ed by in es o s om he No h deploying hei unique
ad an ages in sus ainably add essing social issues (Zah a e al., 2008; Ea ne e al., 2014; Cull e al., 2015). Adap ing hese i m-speci ic
ad an ages o he hos coun y can come a a high cos , gi en ha he con ex -dependen na u e o hyb id o ganiza ions implies ha
disad an ages o o eignness such as lack o hos -coun y ma ke in o ma ion, embeddedness, and legi imacy a e pa icula ly
o midable.
Mo eo e , ou analyses e eal he same nega i e e ec o o eignness on hyb id o ganiza ions' social pe o mance. Speci ically, we
ind pa ial e idence ha , con a y o Hypo hesis 1-B, o eign hyb id o ganiza ions ha e lowe social pe o mance (in pa icula , each
a lowe numbe o clien s) han hei domes ic coun e pa s. This may be because while o eign hyb id o ganiza ions possess unique
i m-speci ic ad an ages ha can con e a compe i i e edge in achie ing social pe o mance, e ec i ely ans e ing hese ad an ages
om he home coun y o he hos coun y, and le e aging hem, equi es ime and esou ces. This becomes e iden when we obse e
he e ec o o eignness be o e
14
and a e con olling o he in e ac ion e ec s be ween o eignness and o ganiza ion size and be-
ween o eignness o ganiza ion enu e in he hos coun y. When we do no con ol o he posi i ely mode a ing impac o size and
enu e, o eign hyb id o ganiza ions appea o ha e highe social pe o mance han hei domes ic coun e pa s by including he
o eign o ganiza ions highe gains om o ganiza ion size and enu e. Howe e , when we hold cons an he mode a ing e ec s o
o ganiza ion size and enu e, we obse e ha o eign hyb id o ganiza ions end o a ain pa ly lowe le el o social pe o mance
compa ed o hei domes ic coun e pa s.
The in e na ional business li e a u e has ecognized ha social pe o mance se es as a means o mi iga ing liabili y o o eignness
o o eign i ms (Ma uyama and Wu, 2015; Sinko ics e al., 2014). Social pe o mance se es as a ehicle o con eying c edibili y
in o ma ion abou o eign i ms, he eby enhancing hei legi imacy wi hin he hos coun y (Mulle , 2020; Mi hani, 2017). In his
14
The lowe -o de model is a ailable upon eques om he au ho s.
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
17
con ex , achie ing social goals can be o s a egic impo ance o o eign hyb id o ganiza ions no only as a undamen al objec i e bu
also as a means o add essing he challenges posed by liabili y o o eignness in hei hos ma ke .
Despi e he ecognized s a egic signi icance o social pe o mance in add essing he liabili y o o eignness, o eign hyb id o -
ganiza ions achie e lowe social pe o mance compa ed o hei domes ic coun e pa s in he hos coun y. This inding is consis en
wi h he li e a u e ha unde sco es he ole o communi y-le el in o ma ion and social ne wo ks in unde s anding cus ome needs and
le e aging domes ic esou ces o enhance social pe o mance (Dacin e al., 2011; Ta e and Bals, 2016). Consequen ly, o eign hyb id
o ganiza ions, acing limi a ions in e ms o amilia i y, social ne wo ks, and legi imacy, encoun e obs acles in expanding hei social
pe o mance compa ed o hei domes ic pee s in he hos coun y.
Ou indings also show ha o eign hyb id o ganiza ions ela i e o domes ic ones, encoun e a pa ial educ ion in inancial
pe o mance o an inc ease in social pe o mance. This inding is pa ly in line wi h Hypo hesis 1-C. This unde sco es ha a aining a
social goal equi es a hyb id o ganiza ion o be socially embedded in he domes ic ma ke in o de o gain he igh in o ma ion and
esou ces (Ta e and Bals, 2016). The eason o his is ha social demand and social in as uc u e a e he e ogeneous, and he c ea ion
o social se ices depends on exis ing social capi al (Chen e al., 2017). Fo example, hyb id o ganiza ions ha use he g oup-lending
echnique o each he poo es segmen s o socie y ely on hei clien s' social capi al (He mes and Lensink, 2007). This illus a es how
local ma ke knowledge and ha nessing o social capi al a e i al o hyb id o ganiza ions o mee hei social goal. Howe e , o eign
hyb id o ganiza ions no mally ha e limi ed local knowledge and a e less locally embedded (Yang and Wu, 2015). Hence, o eign
hyb id o ganiza ions need subs an ial numbe o inancial esou ces o unde s and he hos -coun y con ex and, in u n, adop a
s a egy o enhancing social pe o mance ailo ed o he speci ic con ex o he hos coun y (Ambos e al., 2020). As a esul , o eign
hyb id o ganiza ions compa ed o domes ic hyb id o ganiza ions ace lowe inancial pe o mance o an inc ease in social
pe o mance.
Mo eo e , we ind ha he e ec o o eignness on pe o mance is con ingen upon he hos coun y's ins i u ional quali y. Ou
inding suppo s Hypo hesis 3-A and concu s wi h s udies ha highligh he o midable challenge o o e coming liabili y o o eignness
in ins i u ionally weak hos coun ies (London and Ha , 2004). In such en i onmen s, in o mal social ins i u ions play a p edominan
ole in o mal legal p ocedu es due o o mal ins i u ional oids such as weak ule o law, low go e nmen e ec i eness, and poo
egula o y quali y (De So o, 2000; Khanna and Ya eh, 2007). Acco dingly, in ins i u ionally weak coun ies, he o eignness- ela ed
disad an ages o limi ed embeddedness and limi ed local ma ke knowledge a e o midable (London and Ha , 2004; Sinko ics
e al., 2014). These disad an ages can be pa icula ly challenging o hyb id o ganiza ions since such o ganiza ions need o le e age
he local socioeconomic con ex o a ain hei goals (Angulo-Ruiz e al., 2020). The e o e, ou inding unde sco es ha he nega i e
e ec o o eignness on inancial pe o mance inc eases as he ins i u ional quali y o he hos coun y dec eases.
On he o he hand, gi en he ampan social needs and he high alue a ached o social alue c ea ion in ins i u ionally weak
coun ies, a social goal is a pa icula ly use ul means o secu ing legi imacy and embeddedness in hose coun ies (Sinko ics e al.,
2014; London and Ha , 2004). The ins i u ional oids in hose coun ies also imply ha local connec ions play a i al ole in business
ela ions (London and Ha , 2004). The e o e, i is i al o o eign hyb id o ganiza ions o add ess he high “demand” o social e o m
caused by he ampan social issues endemic in ins i u ionally weak coun ies in o de o o e come he liabili y o o eignness ha
impedes hei acquisi ion o legi imacy, embeddedness, and ma ke knowledge in he hos coun y. Howe e , ou indings do no
suppo hese a gumen s o Hypo hesis 3-B. Ins ead, we ind ha he impac o o eignness on social pe o mance does no depend on
he ins i u ional quali y o he hos coun y.
This unexpec ed esul migh be due o o eign hyb id o ganiza ions p io i izing social pe o mance while encoun e ing a
heigh ened challenge o achie ing social pe o mance due o ins i u ional oids. The ins i u ional oids may also inc ease home- and
hos -coun y dissimila i y, limi ing he o eign hyb id o ganiza ions' po en ial o le e age hei ad an ages in he hos coun y.
The e o e, hese wo opposing condi ions, on he one hand, he o eign hyb id o ganiza ion's high p io i y on social pe o mance, on
he o he hand, he uphill ask o achie ing social pe o mance in weak ins i u ional coun ies, imply ha weak ins i u ions nei he
inc ease no dec ease he impac o o eignness on social pe o mance.
Fu he mo e, we ind ha o ganiza ion size mode a es he e ec o o eignness. In his ega d, ou inding ex ends De Beule e al.
(2020) who a gue ha o eign hyb id o ganiza ions compa ed o domes ic hyb id o ganiza ions ha e c ucial ad an ages ha enhance
inancial pe o mance, such as inancial esou ces, ad anced echnologies, in e na ional bes p ac ices, and expe ise. We ind ha De
Beule e al.'s (2020) claim holds o la ge o eign hyb id o ganiza ions bu no much o smalle ones. Speci ically, la ge o eign
hyb id o ganiza ions a e be e equipped o manage he inancial challenges associa ed wi h ans e ing he a o emen ioned ad-
an ages om he home coun y o he hos coun y and adap ing hem o he speci ic con ex o he hos coun y. Indeed, size can
educe he pe -uni inancial bu den o liabili y o o eignness encoun e ed in adap ing i m-speci ic ad an ages o he hos -coun y
con ex (Se hi and Judge, 2009). The i m-speci ic ad an ages ealized a a la ge o ganiza ion's size can also enable la ge o eign
hyb id o ganiza ions o ope a e wi h be e inancial sus ainabili y. Thus, we ind pa ial suppo o Hypo hesis 4-A ha he inancial
pe o mance o o eign hyb id o ganiza ions compa ed o hei domes ic coun e pa s pa ly imp o es as he o ganiza ion's size
inc eases.
Mo eo e , we ind pa ial suppo o Hypo hesis 3-B, ha o some ex en , he social pe o mance o o eign hyb id o ganiza ions
imp o es in compa ison o hei domes ic coun e pa s, as he o ganiza ion's size inc eases. This inding aligns wi h a gumen s sug-
ges ing ha la ge o eign hyb id o ganiza ions can mo e easily gain amilia i y wi h he hos ma ke and local ma ke in o ma ion
because o hei g ea e inancial s eng h and in e ac ion wi h he local communi y (Eden and Mille , 2004). A he same ime, he
isibili y ha comes wi h size (Eden and Mille , 2004) implies ha la ge o eign hyb id o ganiza ions may be unde g ea e p essu e
o imp o e social pe o mance in o de o main ain hei legi imacy. Addi ionally, he i m-speci ic ad an ages adap ed a la ge o -
ganiza ion's size can equip la ge o eign o ganiza ions o imp o e hei social pe o mance. Fo example, he i m-speci ic ad an age o
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
18
connec edness o in e na ional dono s, who end o be mo e accessible o la ge o eign o ganiza ions, is impo an as la ge o eign
hyb id o ganiza ions may ind i necessa y o demons a e hei social pe o mance o in e na ional s akeholde s (D o i e al., 2020).
15
Consequen ly, la ge o eign hyb id o ganiza ions may choose o p io i ize social pe o mance o main ain hei legi imacy in he eyes
o hose in e na ional dono s, p o ided, o cou se, ha hey can show a iable le el o inancial sus ainabili y.
Tu ning o Hypo hesis 3-C, ou indings e eal ha con a y o his hypo hesis, in la ge o ganiza ion samples, o eign compa ed o
domes ic hyb id o ganiza ions pa ly ace signi ican dec ease in inancial pe o mance o an inc ease in social pe o mance. Whe eas
in smalle o ganiza ion samples, he signi icance diminishes, indica ing o eign compa ed o domes ic hyb id o ganiza ions do no
encoun e a signi icance di e ence in inancial pe o mance o an inc ease in social pe o mance.
The po en ial explana ion o his coun e in ui i e inding may lie in heigh ened challenges in main aining legi imacy—an aspec
o liabili y o o eignness ha inc eases wi h o ganiza ion size (Kos o a and Zahee , 1999). In e na ional business esea ch un-
de sco es ha while an inc ease in o ganiza ion size educes liabili ies o o eignness, such as limi ed connec ions in he local ma ke , i
also inc eases he di icul y o main aining legi imacy due o inc eased isibili y (Kos o a and Zahee , 1999; Eden and Mille , 2004). In
his espec , ou indings demons a e ha la ge o ganiza ion size cons i u es a double-edged swo d o o eign hyb id o ganiza ions,
con e ing bo h ad an ages and disad an ages. On he one hand, as p e iously desc ibed in he indings o Hypo heses 3-A and 3-B, he
ad an ages o la ge o ganiza ion size help o mi iga e he lowe social and inancial pe o mance e ec o o eignness. On he o he
hand, he disad an ages o la ge o ganiza ion size po en ially p essu e o eign hyb id o ganiza ions o augmen social pe o mance, as
discussed in he indings o Hypo hesis 3-B. As well as, he disad an ages po en ially agg a a e o eignness- ela ed lowe inancial
pe o mance linked o an inc ease in social pe o mance, as desc ibed in he con a y inding o Hypo hesis 3-C. Besides, he
imp o emen in he e ec o o eignness on inancial pe o mance, coupled wi h he wo sening o o eignness- ela ed lowe inancial
pe o mance linked o an inc ease in social pe o mance, sugges ha o eignness may in e ac wi h an o ganiza ion's a ious ac i i ies
and se ice o e ings in nuanced ways. This in iguing inding pa es he way o mo e in-dep h in es iga ions, as ou lined in he u u e
esea ch di ec ions sec ion.
Finally, ou indings do no suppo Hypo hesis 4-A bu pa ly suppo Hypo heses 4-B and 4-C. Speci ically, ou s udy e eals ha
he leng h o enu e o a o eign hyb id o ganiza ion in he hos coun y does no mode a e he e ec o o eignness on inancial
pe o mance. Howe e , i posi i ely mode a es he e ec o o eignness on social pe o mance and posi i ely mode a es he e ec o
he in e ac ion be ween o eignness and social pe o mance on inancial pe o mance.
The ac ha ou indings do no suppo Hypo hesis 4-A ha longe enu e mi iga es he e ec o o eignness on inancial pe -
o mance is su p ising. The obus ness o liabili y o o eignness o leng h o enu e may be a ibu ed o he ac ha hyb id o ga-
niza ions engage in con ex ually con ingen ac i i ies. Fu he mo e, he ou come may be linked o he possibili y ha o eign hyb id
o ganiza ions e ol e o e ime, adap ing hei ad an ages o he hos coun y's con ex , wi h an inc eased emphasis on social pe -
o mance once sus ainable inancial pe o mance has been achie ed.
On he o he hand, we ind pa ial suppo o Hypo hesis 4-B, indica ing ha o eign hyb id o ganiza ions' social pe o mance
imp o es wi h longe enu e in a hos coun y. These o ganiza ions gain local ma ke knowledge, embeddedness, and legi imacy o e
ime and, as a esul , become inc easingly able o adap hei i m-speci ic ad an ages o he hos coun y and he eby inc ease hei
social pe o mance. Impo an ly, he ad an ages o o eign hyb id o ganiza ions, such as hei connec ions wi h in e na ional dono s,
o en se e as a esou ce o hei supe io social de elopmen models, manage ial sys ems, and alen (De Beule e al., 2020).
Consequen ly, as o eign hyb id o ganiza ions con inue o adap hese ad an ages o he hos con ex o e ime, hey may choose o
p io i ize social pe o mance in o de o main ain hei legi imacy in he eyes o hei in e na ional dono s.
Mo eo e , we canno ule ou ha liabili y o o eignness pe sis s as o midable obs acle, wi hin he con ex o o ganiza ions as
con ex dependen as hyb ids. As a esul , he g adual imp o emen in social pe o mance may no solely be a ibu ed o he ad-
an ages o o eignness. Gi en ha liabili y o o eignness o hyb id o ganiza ions may decline bu no comple ely anish o e ime,
social pe o mance may emain an essen ial means o main aining legi imacy and os e ing connec ions in he hos coun y o o eign
hyb id o ganiza ions. This is especially ue since hyb id o ganiza ions need o be in ica ely in eg a ed in o hei local con ex , making
high social pe o mance a c ucial means o main aining legi imacy and connec ions o o eign hyb id o ganiza ions.
The indings also p o ide pa ial suppo o Hypo hesis 4-C indica ing a diminish in he o eignness ela ed ade-o be ween
social and inancial pe o mance o e ime. This diminish in he o eignness- ela ed ade-o can be a ibu ed o he g adual
adap a ion o o eign hyb id o ganiza ions' i m-speci ic ad an ages o he hos coun y con ex , enabling hem o be e o e come he
highe inancial pe o mance challenges associa ed wi h achie ing social pe o mance. Addi ionally, his diminish in he o eignness-
ela ed ade-o o e ime may be linked o a g adual dec ease in liabili y o o eignness. While he dec ease in liabili y o o eignness
does no imp o e o e all inancial pe o mance, as demons a ed in he lack o suppo ing e idence o Hypo hesis 4-A, i appea s o
g adually educe he o eignness- ela ed inancial pe o mance challenges associa ed wi h achie ing high social pe o mance, as
demons a ed in he pa ial suppo o Hypo hesis 4-C. This inding ein o ces he complexi y o o eignness in e ac ion and open an
oppo uni y o u u e esea ch o del e in o he sub le in e ac ions be ween o eignness and a ious se ice o e ing o he o gani-
za ions as highligh ed in he u u e esea ch sec ion.
15
Al hough we con ol o dona ions and subsidies in ou eg ession analysis, we canno en i ely ule ou he possibili y ha he dono s hemsel es
may exe an in luence, i espec i e o he dona ion amoun .
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
19
6. Conclusion
This s udy aims o ex end he concep o liabili y o o eignness om he in e na ional business li e a u e on o -p o i i ms o
pe o mance issues ela ed o he in e na ionaliza ion o hyb id o ganiza ions. We a gue ha hyb id o ganiza ions a e a special case
due o hei dual goals o inancial sus ainabili y and social alue c ea ion. In pa icula , we analyze how liabili y o o eignness ha ms
he inancial and social pe o mance o hyb id o ganiza ions ope a ing in o e seas ma ke s.
We es ou hypo heses on a global mul iyea da ase in he mic o inance indus y and ind ha hyb id o ganiza ions o o eign
o igin ha e signi ican ly lowe inancial and social pe o mance compa ed o hyb id o ganiza ions o domes ic o igin. This indica es
ha o eign hyb id o ganiza ions a e con on ed by a signi ican liabili y o o eignness. This nega i e e ec o o eignness on inancial
pe o mance is mo e p onounced as social pe o mance inc eases, indica ing ha hyb id o ganiza ions ace a o eignness- ela ed
ade-o be ween hei dual goals.
Mo eo e , he nega i e e ec o o eignness on inancial pe o mance in hyb id o ganiza ions inc eases in ins i u ionally weak hos
coun ies, whe e o eign o ganiza ions mus ely mo e on in o mal social ela ionships han on o mal legal p ocedu es (London and
Ha , 2004). By con as , he nega i e e ec o o eignness on social pe o mance does no inc ease o dec ease in ins i u ionally weak
hos coun ies, po en ially unde sco ing wo o se ing e ec s. On he one hand, o eign hyb id o ganiza ions may se a highe p io i y
o social goals o ackle hei liabili y o o eignness in ins i u ionally weak coun ies, whe e social p oblems a e endemic and social
alue c ea ion is highly alued. On he o he hand, o eign hyb id o ganiza ions ace g ea e challenges in achie ing social goals due o
ins i u ional oids ha inc ease hei lack o embeddedness, amilia i y and knowledge o he hos coun y.
Fu he mo e, he nega i e e ec o o eignness on inancial pe o mance dec eases as he o ganiza ion's size inc eases, consis en
wi h he economy o scale a gumen s in he in e na ional business li e a u e (Bloms ¨
om and Lipsey, 1991; Henna , 2007), sugges ing
ha scaling enables o eign hyb id o ganiza ions o lowe he pe -uni cos o ans e ing hei ad an ages om hei home coun y o
he hos coun y. Rela edly, he e is pa ial e idence ha scaling imp o es o eign hyb id o ganiza ions' social pe o mance compa ed
o ha o hei domes ic coun e pa s. In con as , we also disco e ha he o eignness- ela ed lowe inancial pe o mance o
achie ing social pe o mance is pa ly impo an in la ge o ganiza ions bu diminishes in smalle o ganiza ions. This e lec s he
di icul ies ha la ge o ganiza ion size poses o o eign hyb id o ganiza ions, wi h g ea e isibili y posing g ea e challenges o
main aining hei legi imacy in he hos coun y (Kos o a and Zahee , 1999; Eden and Mille , 2004).
Fu he mo e, he nega i e e ec o o eignness on inancial pe o mance does no depend on he o ganiza ion's enu e in he hos
coun y. By con as , he nega i e e ec o o eignness on social pe o mance dec eases as he leng h o enu e inc eases. Simila ly, he
nega i e in e ac ion e ec o o eignness and social pe o mance on inancial pe o mance diminishes o e longe enu e.
These esul s on enu e ha e wo co olla ies ha collec i ely o indi idually explain he indings. Fi s , o eign hyb id o ganiza-
ions exhibi a g adual adap a ion o he hos con ex : hey le e age hei ad an ages, inc ease social pe o mance, and educe he cos s
o achie ing i . By doing so, o eign hyb id o ganiza ions may p io i ize social pe o mance as long as inancial pe o mance is sus-
ainable. Second, liabili ies o o eignness educe bu pe sis in hyb id o ganiza ions due o hei highly con ex -dependen na u e. This
ongoing liabili y o o eignness may con inue o o e shadow o e all inancial pe o mance imp o emen s, e en i he o eignness cos s
o achie ing social pe o mance appea o dec ease. As a esul , o eign hyb id o ganiza ions p io i ize social pe o mance as a means
o add essing his pe sis en liabili y.
6.1. Con ibu ions
This s udy ollows Alon e al.'s (2020) call o le e age in e na ional business heo ies o be e unde s and he pe o mance o
o eign hyb id o ganiza ions. In pa icula , we espond o he au ho s' call o add ess how in e na ionaliza ion in luences he ade-o
be ween social pe o mance and inancial pe o mance ha cha ac e izes o eign hyb id o ganiza ions.
By connec ing he liabili y o o eignness li e a u e wi h he hyb id o ganiza ion li e a u e, we p o ide empi ical e idence ha
liabili y o o eignness dec eases he social and inancial pe o mance o hyb id o ganiza ions. We also demons a e ha despi e he
s a egic impo ance o social pe o mance in educing liabili y o o eignness, social pe o mance s eng hens he nega i e e ec o
o eignness on inancial pe o mance, especially du ing he ini ial yea s o enu e in he hos coun y.
Ou indings also enhance ou unde s anding o how o eignness impac s he dual pe o mance o hyb id o ganiza ions, especially
in weake ins i u ional se ings whe e hese o ganiza ions a e p e alen . While ins i u ionally weake coun ies exace ba e he
inancial challenges o o eignness, hey do no al e i s e ec on social pe o mance. The la e obse a ion highligh s he po en ial o
o se ing e ec s ha o eign hyb id o ganiza ions may p io i ize social pe o mance bu a he same ime encoun e heigh ened
challenges in achie ing social pe o mance in ins i u ionally weak coun ies.
Mo eo e , we ex end he p e iously obse ed mode a ing bene i o scale economy on he inancial pe o mance o egula o -
p o i i ms o he dual goals o social and inancial pe o mance o o eign hyb id o ganiza ions. In emphasizing he c ucial ole o
scaling, we documen an unexpec ed inding: scaling, ypically ad an ageous, can ha e a nega i e mode a ing e ec . Speci ically, i
exace ba es he inancial pe o mance challenges o o eignness linked o achie ing social pe o mance. In emphasizing he ole o
scaling, we d aw a en ion o he ad an ages and disad an ages o scaling o o eign hyb id o ganiza ions.
Addi ionally, we build upon p io esea ch ha has demons a ed he mode a ing ole o o ganiza ion enu e in a hos coun y
(Johanson and Vahlne, 1977, 2009; Zahee and Mosakowski, 1997). Ou s udy di e ges om p e ious indings by e ealing ha
enu e does no signi ican ly al e he nega i e e ec o o eignness on he inancial pe o mance o hyb id o ganiza ions, indica ing
he pe sis en na u e o liabili ies o o eignness in con ex -dependen o ganiza ions o he g adual adap a ion o ad an ages o
o eignness po en ially shaping he s a egic choice o o eign o ganiza ions o e hei dual pe o mances once hey mee a iable le el
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
20
o inancial sus ainabili y o bo h. Besides, ou s udy yields wo no able insigh s. Fi s , enu e mi iga es he nega i e e ec o
o eignness on social pe o mance, sugges ing a g adual adap a ion o i m-speci ic ad an ages and e ol ing s a egic choices in lu-
enced by he disad an ages and ad an ages o o eignness. Second, enu e pa ially mi iga es he o eignness- ela ed ade-o be ween
social and inancial pe o mance, sugges ing a g adual le e aging o he ad an ages o o eignness, a educ ion o liabili y o
o eignness, o bo h.
O e all, by in eg a ing he hyb id o ganiza ion li e a u e and he liabili y o o eignness li e a u e, we ha e be e ed ou unde -
s anding o he dual pe o mance o o eign hyb id o ganiza ions. By in eg a ing hese wo bodies o li e a u e and employing an
empi ical con ex , we del e in o he ad an ages and disad an ages o o eignness. By doing so, we demons a e how o eignness,
whe he di ec ly o indi ec ly in luencing he s a egic choices o o eign hyb id o ganiza ions, impac s he dual pe o mance goals o
hese o ganiza ions and, in pa icula , he ade-o be ween hem.
Ou indings can be used as a sou ce o p ac ical ad ice o global impac in es o s and social en ep eneu s seeking o launch
hyb id o ganiza ions ac oss na ional bo de s. As e idence-based inpu o p ac i ione s and policymake s, ou indings imply ha
es ablishing hyb id o ganiza ions in o e seas loca ions equi es mo e han a me e in e es in add essing a de elopmen challenge in a
low-income pa o he globe. In es o s who s a up hyb id o ganiza ions should be awa e o he impac o liabili y o o eignness on
he inancial and social pe o mance o hei o ganiza ion, and ha hese inancial challenges can be mo e o midable when he
ins i u ional quali y o he hos coun y is lowe . These indings also imply ha o eign hyb id o ganiza ions should y o mi iga e
liabili y o o eignness by scaling up hei size, as well as by inc easing hei enu e in he hos coun y. Howe e , i is c ucial o no e
ha scaling up may also ca y po en ial d awbacks, which we highligh . The e o e, be o e expanding ab oad, socially mo i a ed
en ep eneu s and in es o s should ha e access o deep inancial pocke s o scale up and p olong hei enu e in o de o mi iga e
liabili y o o eignness.
6.2. Limi a ions and u u e esea ch
We sugges ha u u e esea ch add ess he liabili y o o eignness o hyb id o ganiza ions in o he indus ies beyond mic o inance,
such as he aid sec o , he educa ion sec o , o in ela ion o de elopmen -o ien ed p i a e equi y inancing. Hope ully, his can es he
gene alizabili y o he p esen s udy. Mo eo e , since ou ca ego iza ion o a o eign e sus domes ic mic o inance ins i u ion is bina y
(yes o no), we sugges ha u u e esea ch explo e any di e en ial e ec ha is dependen on he le el o o eign in ol emen . I
would also be in e es ing o explo e how o eign o igin in luences he cha ac e is ics o he op-managemen eam o in e media e
ou comes such as po olio a isk (PAR), in o de o unco e any media ed e ec s. Fu u e esea ch should explo e how o eignness
in e ac s wi h he di e en se ice o e ings and ac i i ies wi hin he hyb id o ganiza ion. This would be e ou unde s anding o he
many ways in which o eignness a ec s he o e all pe o mances o o ganiza ions.
To emo e sys emic a iance and isola e o he explana ions, we ha e ied o accoun o a possible con ounding e ec by applying
a numbe o con ol a iables sugges ed by p io esea ch. Fu u e esea ch can con inue o add ess o he possible explana ions in his
espec and e i y ou s udy. Since all he analyzed o ganiza ions in his s udy a e hyb id, simul aneously aiming o social and
inancial goals, we a e no able o es he e ec o o ganiza ional pu pose. This should be done in u u e s udies, bo h as heo y-
gene a ing quali a i e esea ch o by going beyond hyb id o ganiza ions by u he explo ing he na u e and s eng h o o ganiza-
ional pu pose. Howe e , such s udies should be conduc ed cau iously, owing o complexi ies in compa ing dis inc se ings.
Funding
This esea ch did no ecei e any speci ic g an om unding agencies in he public, comme cial, o no - o -p o i sec o s.
CRediT au ho ship con ibu ion s a emen
Tigis Wolde sadik Sommeno: Da a cu a ion, Fo mal analysis, In es iga ion, Me hodology, Valida ion, Visualiza ion, W i ing –
o iginal d a , W i ing – e iew & edi ing, Concep ualiza ion. Roy Me sland: W i ing – e iew & edi ing, Da a cu a ion, Resou ces,
Supe ision, Concep ualiza ion. T ond Randøy: Supe ision, W i ing – o iginal d a , W i ing – e iew & edi ing, Concep ualiza ion.
Decla a ion o compe ing in e es
None.
Da a a ailabili y
The au ho s do no ha e pe mission o sha e da a.
Acknowledgmen s
We would like o hank he Associa e Edi o , And eas Scho e and wo anonymous e iewe s o hei cons uc i e commen s. We
a e also hank ul o he pa icipan s a he ollowing con e ences and wo kshops o hei insigh ul commen s: CERSEM Resea ch Day
(K is iansand. Ap il 2018), 7 h Aalbo g In e na ional Business Con e ence (Aalbo g. May 2018), 1s Join CERSEM – CERMi Wo kshop
T.W. Sommeno e al.
Jou nal o In e na ional Managemen 30 (2024) 101133
21
(K is iansand. No embe 2019), 44 h Eu opean In e na ional Business Academy Con e ence (Pozna´
n. Decembe 2018), EIBA Doc o al
Conso ium (Pozna´
n. Decembe 2018), FIBE Doc o al Colloquium (Be gen. Janua y 2019), 6 h Eu opean Resea ch Con e ence on
Mic o inance (Pa is. June 2019), Academy o In e na ional Business 2019 Annual Mee ing (Copenhagen. June 2019) and AIB-Jou nal
o Wo ld Business Pape De elopmen Wo kshop (Copenhagen. June 2019), SNF Resea che Lunch (Be gen. Sep embe 2023).
Appendix A. Supplemen a y da a
Supplemen a y da a o his a icle can be ound online a h ps://doi.o g/10.1016/j.in man.2024.101133.
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