Financial/Social Trade-Offs in Dual-Purpose Companies

Abstract

Dual-purpose companies (DPCs) encounter numerous financial and social trade-offs in their operations. However, existing research has not fully explored the heterogeneity and antecedents of these trade-offs. To bridge this gap, we first distinguish between scenarios in which trade-offs are mitigated or intensified, and then categorize the intensification into two directions: social dominance and financial dominance. We hypothesize that unique combinations of governance arrangements and organizational capabilities result in different trade-off scenarios. To test our hypothesis, we conducted a fsQCA of 46 subsidiaries within a Chinese state-owned enterprise group. We identify three patterns that mitigate trade-offs and three patterns that intensify them. The findings highlight the complex interplay between governance mechanisms and organizational capabilities related to different trade-off scenarios, and the diverse pathways towards trade-off mitigation, and the causal asymmetry between patterns of different trade-off scenarios. Overall, this study advances our understanding of the heterogeneity of financial/social trade-offs in DPCs.