J Bus Ethics DOI 10.1007/s10551-014-2495-y

Sustaining Inter-organizational Relationships Across Institutional Logics and Power Asymmetries: The Case of Fair

Alex Nicholls • Benjamin Huybrechts

Received: 17 June 2014 / Accepted: 3 December 2014 Springer Science+ Media Dordrecht 2014

Abstract This paper explores an empirical puzzle, Introduction namely, how inter-organizational relationships can be sustained between that draw upon distinc- In fair trade (FT), as well as in other ‘mixed-form’ fields tive—and potentially conflicting—institutional logics (Becchetti and Huybrechts 2008; Marwell and McInerney under conditions of power asymmetry. This research 2005), non-profit organizations and social enterprises have analyses cases of these relationships and suggests some key been partnering with large over long time conditions underlying them. Examining relationships periods despite the presence of conditions that might be between ‘Fair Trade’ organizations and corporate retailers, expected to destabilize such relationships. These conditions a series of contingent factors behind the dynamic persis- include striking differences in size, economic power, and tence of such relationships are proposed, namely: the pre- organizational goals or ‘logics’. Given these asymmetries, sence of pre-existing ‘hybrid logics’; the use of boundary- the collaborations are typically seen as problematic and spanning discourses; joint tolerance of conflict; and co- temporary because the stronger party (the ) will creation of common rules. These four elements are sup- impose its (market) logics upon the weaker one (the social ported by a fifth mediating factor, i.e. the presence and use enterprise), leading to either instrumentalizing and corrupt- of a Fair Trade certification system in the collaboration. ing the latter or to the breakdown of the collaboration. Whilst The latter appears as a central vehicle facilitating cross- some of the literature on FT and other market-oriented social logic relationships—it can be seen as a ‘boundary object’ movements has tended to depict corporate participation as a embodying a series of narratives and discourses that are threat to the original goals of the social movement and to the open to multiple interpretations corresponding to the integrity of partnering social enterprises (e.g. Fridell et al. dominant institutional logics of each partner . 2008; Reed 2009), there is evidence of a set of social enter- prise-corporate relationships that persist over time and can- Keywords Inter-organizational relationship Á not be simply summarized as dominated by the sole Institutional logics Á Power asymmetry Á Fair trade Á Social corporate, market logic. These examples illustrate the enterprise Á Corporate retailer Á Buyer–seller exchange emergence of new working relationships across the con- ventional divides between distinct sectors—the public, pri- vate, and civil society—that offer new approaches to managing power asymmetries and apparently conflicting logics—typically, in FT and more generally in social entre- A. Nicholls preneurship, market and social justice/welfare logics (Bat- Saı¨d Business School, University of Oxford, Park End Street, Oxford OX1 1HP, UK tilana and Lee 2014; Defourny and Nyssens 2006; e-mail: [email protected] Huybrechts and Nicholls 2012; Smith et al. forthcoming). This leads to the following research question: B. Huybrechts (&) HEC School, University of Liege, Rue Louvrex 14, Under what conditions can inter-organizational rela- 4000 Liege, Belgium tionships emerge and be sustained despite power e-mail: [email protected] 123 A. Nicholls, B. Huybrechts

asymmetries and the presence of distinct, potentially of inter-organizational relationships that suggest that the conflicting, institutional logics? more powerful actor will always impose its logics upon the less powerful organization thus undermining the persis- Answering this question responds to several research tence of the relationship over time. In the process, this gaps. First, research on inter-organizational relationships research adds a new construct to existing theory around the suggests that such relationships may fail because the partners resolution of conflict in institutional logics by suggesting have unequal power and draw upon distinctive institutional that ‘‘dynamic persistence’’ is also evident in contrast to logics (Galaskiewicz and Colman 2006; Hardy and Phillips examples of conflict resolution through dominance, com- 1998). In the case of ‘cross-sector ’ (Di Dome- promise, hybridization, synthesis, or relationship break- nico et al. 2009; le Ber and Branzei 2010), the relationships down. Based on the analysis of the relationships between are often framed as reflecting the broader (im)balance commercial buyers and FTOs, initially embodying market between the fields represented by each partner (Huybrechts and social justice logics respectively, this paper proposes a and Nicholls 2013; Phillips et al. 2000). Even if a more set of key conditions under which dynamic persistence can agency-based perspective also acknowledges the role of be observed even in the presence of power asymmetries, inter-organizational relationships as ‘laboratories’ that are namely: the presence of pre-existing ‘hybrid logics’; likely to infuse the broader institutional arrangements boundary-spanning discourses; joint tolerance of conflict; (Lawrence et al. 2002; Phillips et al. 2000), it is still not clear and co-creation of common rules. These four factors seem how these relationships can acquire sufficient stability in the to be enabled and consolidated thanks to the presence and first place in order to fulfil this exemplary function. use of the FT certification system in the relationship. The Second, the literature on FT and on market-oriented latter appears as a central vehicle facilitating cross-logic social movements in general has tended to consider cross- relationships—it can thus be seen as a ‘boundary object’ sector partnerships with large corporations as representing embodying a series of narratives and discourses that are a broader ‘co-optation’ or ‘dilution’ trend (Fridell et al. open to multiple interpretations corresponding to the dif- 2008; Jaffee 2010; Reed 2009) without always taking into ferent dominant institutional logics of each partner account the diversity of these partnerships. Whilst more organization. fine-grained analyses of the FT movement have docu- This paper is structured as follows. Next, the theoretical mented the diversity of practices from both corporate positioning of this paper is set out in terms of research on retailers (Bezenc¸on and Blili 2009; Smith 2010) and spe- institutional logics and inter-organizational relationships. cialized fair trade organizations (FTOs) (Huybrechts After this, the methodology and the FT relationships exam- 2010a, 2012), the richness of FTO-corporate relationships ined here are presented. The findings of the exploratory has been less documented (Huybrechts and Nicholls 2013; analysis are then presented and discussed, leading to a set of Raynolds 2009). Their continued existence in a context theoretical propositions. Conclusions summarize the paper’s where the FT label enables corporate retailers to stock contributions and suggest lines of future research. fairly traded products without necessarily having to partner with a specialized FT importer (Becchetti and Huybrechts 2008) is already an interesting research puzzle per se. Institutional Logics Third, the subset of institutional theory focussing on ‘institutional logics’ (Thornton and Ocasio 1999) has ten- Friedland and Alford (1991, p. 248) noted that institutional ded to frame conflict between logics as a temporary process logics are a set of ‘material practices and symbolic con- in the transition towards a new equilibrium in which a structions’ that represent the organizing principles of dominant logic is supposed to outrun or squeeze out non- society and that are ‘available to organizations and indi- dominant logics (Marquis and Lounsbury 2007; Purdy and viduals to elaborate’. Drawing upon extant cultural mate- Gray 2009; van Gestel and Hillebrand 2011). Whilst an rial (Thornton 2004), such logics inform the behaviour of emerging body of work has documented how potentially individual actors within a field, and make action ‘com- conflicting logics are managed in a relatively stable way at prehensible and predictable’ to others (Lounsbury 2002, the level of entire fields (Reay and Hinings 2009) or within p. 255). As Tracey et al. (2011) pointed out, common, ‘hybrid organizations’ (Battilana and Dorado 2010; Doh- shared, institutional logics also help set the boundaries of erty et al. 2014; Pache and Santos 2013), the contributions fields and create the identities of field members (see also of and sustaining factors behind inter-organizational rela- Santos and Eisenhardt 2005). Thus, institutional logics tionships in this process have received virtually no represent culturally reinforced rules of action that have attention. important roles in processes of organizational identity Hence, the analysis in this paper aims to extend theory formation, sense-making, and legitimation (Suchman 1995; by providing an alternative to more deterministic analyses Thornton 2002, 2004; Thornton and Ocasio 1999).

123 Sustaining Inter-organizational Relationships Across Institutional Logics

The institutional theory literature suggests two broad and environmental change presented a false dichotomy in settings in which logics operate. First, a well-established the context of emergent hybrid organizational forms (see stream of research suggests that dominant institutional also Murray 2010). Tracey et al. (2011) further developed logics act as powerful normative forces that drive confor- this analysis of logic hybridity in their discussion of social mity—or isomorphism—within fields and at the organiza- enterprise formation via ‘bridging institutional entrepre- tional level (DiMaggio and Powell 1983; Kitchener 2002; neurship’. Finally, van Gestel and Hillebrand (2011) Scott et al. 2000). Such work supports a fundamental explored the use of ‘deliberate ambiguity’ (245) to allow institutionalist assumption that coherent logics are func- for a consensus between actors grounded in oppositional tionally important because they create a sense of common logics, but here too this was shown to be only ‘temporary’. purpose and unity within an organizational field leading to Thus, whilst some research has acknowledged the stability over time. In this setting, the co-existence of potential for the co-existence of multiple logics over time, conflicting logics has typically been presented as a tem- the analytic focus has largely been on how actors within a porary phenomenon that is resolved through competition single organization or field cope with the presence at the and ultimate dominance (Hensmans 2003; Hoffman 1999). macro-level of conflicting institutional logics (see, for Second, a more recent body of work has explored how example, Guston’s 2001 work on ‘boundary organiza- conflicting or oppositional logics can provide the mecha- tions’) or how they synthesize logics into new organiza- nisms by which institutional change comes about (Louns- tional forms or field-level rationales for action (Rao and bury 2007; Rao and Gorgi 2006; Reay and Hinings 2005). Gorgi 2006; Tracey et al. 2011). In contrast, there is a Empirical research on the nature of the interactions relative paucity of theory building within institutionalism between conflicting logics has tended to elaborate either that explores the micro-dynamics of the interactions dialectical processes (Seo and Creed 2002), in which a ‘‘between’’ organizations that embody oppositional or single logic comes to dominate and forms a new set of contradictory institutional logics (for a similar micro-level constraining norms, or patterns of resistance, duality and of analysis see Barley 2008; Powell and Colyvas 2008). quasi-assimilation in which actors work at different levels to manage logic dissonance (Maguire et al. 2004; Reay and Hinings 2005) or to subvert the current status quo (Marquis Inter-organizational Relationships and Lounsbury 2007). In the former analysis, the coexis- tence of multiple logics has typically been theorized in To date, work on theorizing inter-organizational relation- temporary situations of field emergence (Maguire et al. ships has proved to be rich and diverse (Gray and Wood 2004; Santos and Eisenhardt 2009) or institutional change 1991; Austin 2000; Dorado et al. 2009). The most com- (den Hond and de Bakker 2007; Lounsbury et al. 2003). In monly agreed rationale behind the formation of inter- the latter stream of work, various ways have been observed organizational relationships focuses on the importance of through which conflicting logics can be sustained by field shared goals and mutual benefits drawing upon resource members: via hybridization within a given profession dependency theory (Pfeffer and Salancik 1978). Such (Dunn and Jones 2010) or organizational form (Battilana thinking suggests that inter-organizational relationships and Dorado 2010; Tracey et al. 2011); by particular field form and sustain based upon participants’ expectations of a members invoking distinctiveness based on their profession positive balance between the benefits derived and costs (Reay and Hinings 2009), sectoral background (Pache and incurred in the relationship (Coleman 1990; Brass et al. Santos 2013), geographical position (Lounsbury 2007, 2004). 2008), and/or history (Greenwood et al. 2010); and by a A second stream of research draws upon social identity process of management as intact resource pools by and theory. In this approach inter-organizational relationships within organizations (Pache and Santos 2013; Purdy and are characterized by group dynamics and the ties typical of Gray 2009). bonding social capital irrespective of the allocation of The co-existence of conflicting logics has also been benefits and resources (Putnam 1993; Anthony 2005). explained by field-level arguments such as fragmentation These connections draw upon common characteristics and centralization (Pache and Santos 2010) or the avail- (race, gender, religion, location) as well as shared identities ability/transparency of opportunities (Dorado 2005). Else- built over time through iterative processes of social con- where, drawing partly upon previous work on social tact. In terms of organizations, shared strategic goals and movement identity formation and mobilization (Schneiberg objectives can provide such social capital and negotiations and Lounsbury 2008); Mars and Lounsbury (2009) focused can constitute social contact (di Domenico et al. 2009). on the formation and persistence of hybrid logics. They Third, economic analyses of buyer–seller relationships contended that the assumption that market logics were in (see e.g. Cannon and Perreault 1999) examine the rela- direct opposition to, or in conflict with, the logics of social tional structure (market, hierarchy, trust: see Williamson 123 A. Nicholls, B. Huybrechts

1979) and the alignment of value in these relationships new logic informed by the dominant logic). As a conse- (Wilson 1995). In buyer–seller as well as in other inter- quence, there is little available theory concerning the con- organizational relationships, more sociological analyses ditions under which conflicting logics within inter- also suggest avenues through which power imbalances can organizational relationships may persist over time. Yet, be managed, including: collaborative governance (Clegg evidence suggests that such dynamic persistence of logics et al. 2002); boundary-spanning trust agents (Marchington does exist (e.g. Huybrechts and Nicholls 2013). This paper and Vincent 2004); and collective identity-building (Hardy explores one such empirical site to develop new theory et al. 2005). around such apparent anomalies: the set of relationships These theoretical analyses highlight the importance of between corporate retail buyers and fair trade organizations. balance and commonality in building and sustaining inter- organizational relationships. However, it is less clear what they have to say about the presence of conflicting logics or Methods asymmetrical power relationships (di Domenico et al. 2009). Inter-organizational relationships both reflect and This research uses qualitative methods and, in particular, feed field-level institutional arrangements, as ‘engaging in studies the cases of six partnerships involving FTOs and collaborative action is dependent on the invocation of rules corporate retailers. The case study method was favoured and resources at the same time as it serves to reproduce given the interpretive and exploratory nature of this study as them’ (Phillips et al. 2000, p. 32). In a context of con- well as its focus on processes rather than causal relationships flicting logics, therefore, logic dominance would be (Yin 2009). The aim was to build theory from observed cases expected to reflect the power configurations within rela- rather than to test pre-existing hypotheses (Eisenhardt 1989; tionships, with the resource-rich side imposing its ‘rules of Eisenhardt and Graebner 2007). Therefore, inter-organiza- the game’ and marginalizing the logics of the resource- tional relationships enduring over time despite distinct logics poor side. Also of relevance here is research that has and apparent power asymmetries were specifically targeted suggested that differentials in status and power across to explore their underlying conditions. organizations might reduce the participants’ willingness to engage and remain in a (Ostrom 1990). This representation of value exchange processes as privileging The Case Study prevailing logics is grounded in the conceptualization of fields as ‘arenas of power relations’ where some actors Fair trade (FT) was chosen as the focal field of analysis for occupy ‘more advantaged positions than others’ (Brint and this research since it represents a well-established example Karabel 1991, p. 355; see also Clegg 1989) and can capi- of a social movement that has mainstreamed into markets talize on these positions to advance their theories of value via partnerships with corporate retailers (Nicholls and Opal (Murray 2010). There is a growing body of research on 2005). FT has its roots in a range of social movements that exchange situations where value differences cannot be campaigned for trade justice for poor producers in the neglected because such exchanges cross field boundaries— South. Whilst the origins of FT lie in the logic of the co- for example, those between family and commerce (see e.g. operatives and social movements focussed on trade justice, Zelizer 1985)—or because the field is defined by alterna- the first practical attempts to provide market access to poor tive and potentially conflicting institutional logics (Kaplan producers were developed by non-governmental organiza- and Murray 2010; Murray 2010; Zuckerman 2012). Little tions (NGOs) and charities after the second world war work, however, explores how these conflicting logics are (Raynolds and Long 2007). The FT model has a number of concretely mediated in ‘unbalanced’ inter-organizational distinct features, including: the payment of an agreed, relationships. An exception is di Domenico et al. (2009), locally determined, minimum price; long-term contracts; who addressed the potential logic conflicts in social advance payments; minimum labour standards; capacity enterprise-corporation collaboration, but suggested a reso- building and technical assistance for producers; and an lution that requires a new synthesis in which both partners additional FT development premium, typically 10 % of the come to ‘operate according to a set of values which are gate price of goods sold (Nicholls and Opal 2005). At its substantively different from those that guide their respec- heart, FT ensures that a greater proportion of value chain tive behaviours outside the parameters of the collaboration’ rents accrue to the producer or artisan than in conventional (900) rather than any conditions of stasis. supply chains. Thus, the FT model combines action for In summary, there has been a general assumption that with advocacy, political cam- conflicting logics across organizational relationships ulti- paigning, and raising awareness of trade—and social— mately lead to the dominance of a single logic at the field or justice issues (Becchetti and Huybrechts 2008; Huybrechts organizational level (or, at least, a compromise synthesis of a 2012; Nicholls 2010). 123 Sustaining Inter-organizational Relationships Across Institutional Logics

Starting in 1988 with the introduction of the Max perspectives, the triangulation of which increased the Havelaar label in the Netherlands, a set of FT standards validity of the observations (Patton 2002). Even if the were developed and later formalized into an international small number of cases does not allow for overall general- certification scheme led by Fairtrade1 International (for- ization, their theoretical relevance and exemplary nature merly Fairtrade Labelling Organizations International) and (Yin 2009) enable to formulate theoretical propositions that identified on products by a FT mark or label (Crowell and are likely to inform future theory-testing studies in FT and Reed 2009; Raynolds and Long 2007). It is generally in other fields with similar cross-sector relationships agreed that the emergence of standards and a certification (Fig. 1). mark brought a fundamental change in the evolution of FT, First, five FTOs (two in the UK and three in Belgium) opening up the social movement’s logic, organizational were selected for their pioneering roles in interacting with legitimacies, and supply chain model to corporations and corporations. As a British FT pioneer, FTOA had long leading to exponential sales growth (Moore et al. 2006; experience in distributing FT products through a network Raynolds and Long 2007; Reed 2009). In the UK, the of grass-roots volunteers and through mainstream retailers launch of the FT mark, and its introduction in supermar- from the mid-1990s (including CORPA and CORPB—see kets, grew sales from £16.7 million (1998) to £1.2 billion below). Also UK based, FTOB focused on designing and (2010), corresponding to an average of 40 % annual manufacturing garments to be retailed by specialist fashion growth (Fairtrade Foundation 2010). Over the past shops as well as by mainstream retailers, including CORPB 10 years the global sales of certified FT goods have also (from 1993 on). FTOC, based in Belgium, worked for grown annually at double-digit rates. In 2009, the global 12 years with one large retailer (CORPD) to develop FT market for certified FT goods stood at over €3.4 billion coffee and cotton bags. FTOD was a Belgian FT pioneer (FLO-I 2010) with these sales returning more than €230 that was the first to enter mainstream retailing in 1994 million in extra income to poor producers and artisans (working with CORPD). Finally, FTOE specifically tar- (FLO-I 2010). Whilst several corporate retailers have geted mainstream retailers and partnered with CORPD and developed own-branded product ranges, many of them still CORPE for a range of food products. work, instead of or in parallel with own FT brands, with Second, to capture corporate perspectives on their specialized FTOs who are particularly legitimate for cer- interactions with FTOs, interviews were carried out from tain consumers and activists (Nicholls 2010). It is this September 2011 to October 2012 with senior managers specific part of the corporate engagement with FT that this (buyers and CSR executives, see Table 1) from British and paper deals with. Belgian corporate retailers buying FT products from the FTOs included in the study. In the UK, CORPA ‘has Data Collection and Analysis always shown a strong commitment to selling Fairtrade products’ (company’s website) and sold a range of FTOA The paper builds on twenty interviews, sixty-four hours of food products. CORPB presented itself as ‘the world’s participant observation (FTO Board meetings) and an largest retailer of Fairtrade products’ (internal document), analysis of fifty-two documents conducted between 2008 and sold school uniforms supplied by FTOB. CORPC and 2011. These data were collected in three types of retailed several FT products including tea, wine, cotton- organizations: organizations that import and distribute FT based products as well as handmade cards imported products (FTOs); mainstream retail corporations that sell through FTOA. In Belgium, CORPD, one of the first cor- FT products (food and textiles); and market intermediaries porate retailers to engage with FT, initially only worked that facilitate FT contracts. Long-standing partnerships with FTOD but later diversified its sourcing through part- between FTOs and retail corporations were identified in nerships with FTOC and with FTOE. Finally, CORPE was two countries in which there are well-developed FT mar- a franchisee-based retailer sourcing several FT products kets (Huybrechts and Reed 2010): Belgium (Huybrechts from FTOE. 2010a; b) and the UK (Davies 2009; Nicholls 2010). Six Third, six semi-structured key informant interviews such partnerships were examined in both countries, dealing were carried out between May 2010 and September 2012 with food products and also with textiles. The interviews with senior managers in four intermediary FT labelling with representatives from these three groups, the authors’ organizations: one dedicated to the UK (FTLUK), one participation in two FTO Boards, as well as the analysis of operating in Belgium (FTLB), one international (Faitrade numerous documents, offered complementary empirical International), and one US-based but operating interna- tionally (FTLUS). Two additional interviews involved independent consultants with previous experience as cor- 1 Note that ‘Fairtrade’ in one word was introduced to refer to Fair Trade certification—as part of their brand strategy—by Fairtrade porate buyers (in textile and food products) and current International. functions at a labelling organization (EXP1) and in an 123 A. Nicholls, B. Huybrechts

Fig. 1 The case studies FTLUK UK Cerficaon Standard-seng

CORPA FLO-I FTOA

CORPB FTOB FTLUS CORPC E x EXP1 p Belgium FTLB e EXP2 Cerficaon r t i FTOC s CORPD e FTOD CORPE

FTOE

international FT network (EXP2). In all three settings, the themes on how and under what conditions inter-organiza- interview questions were semi-directed and specifically tional relations were sustained over time. For the sake of addressed the different actors’ institutional logics, practices theorization and generalization, the focus was on the sim- and perceptions of FT, their own inter-organizational ilar patterns observed across the partnerships in terms of relationships, and the broader interrelationships between common conditions for persistent partnerships. Hence, the FT movement and the corporate world. cases were contrasted only regarding these conditions and Participant observation was also conducted between minor differences relating to products or culture were not 2009 and 2012, including regular author participation in the further developed here. Board meetings of FTOB and FTOD. These meetings As themes emerged, further analysis of the data devel- yielded more than 64 h of observation covering strategic oped more refined sub-themes that were mapped against discussions and decision-making on building relationships previous research on FT. Data nodes were examined in with mainstream retailers. The interviews and document combination, as well as by theme, to explore various analyses were mapped against the data. dimensions of the responses. Quotes were then selected for Finally, documentary analysis included fifty-two docu- each of these dimensions. Relevant quotes were collected ments from the three types of actors: fifteen annual reports in a separate file after translation if necessary (from Dutch (2008–2010), three strategic notes, and five websites from or French into English). Finally, through iterative linkages FTOs; twenty CSR reports (2007–2010) and five websites with relevant literature, theoretical contributions were from corporate retailers; four documents setting out the FT identified for each of the themes in terms of the conditions standards in order to frame the practices and discourses of underlying persistent inter-organizational relationships in both FTOs and corporate retailers. This documentary the context of logic conflict and power asymmetry. material was also mapped against other empirical studies on corporate engagement with FT (e.g. Bezenc¸on and Blili 2009; Moore et al. 2006; Smith 2010). Findings The analysis of the data involved three processes. First, transcripts, Board meeting notes and syntheses from the The literature on the ‘mainstreaming’ of FT through cor- documentary analysis were read and reread for familiar- porate retailers suggests a shift in which market logics have ization with the data. Second, a more detailed and sys- come to take certain primacy over social and trade justice tematic analysis was carried out to identify cross-sectional logics (Fridell et al. 2008; Jaffee 2010; Reed 2009). Thus,

123 Sustaining Inter-organizational Relationships Across Institutional Logics

Table 1 The interviewees Type of organization Country Descriptor Interviewee’s position

Fair trade organizations UK FTOA (1) CEO (2) Marketing director (3) Producer partnerships manager FTOB (4) Founding entrepreneur Belgium FTOC (5) Founding entrepreneur FTOD (6) Marketing director (7) Retail manager FTOE (8) Commercial manager Corporate retailers UK CORPA (9) Head of ethical trade CORPB (10) Head of ethical CORPC (11) Head of CSR Belgium CORPD (12) Category manager (organic and fair trade) (13) Franchising manager CORPE (14) Category manager (15) Marketing director Intermediaries/labelling UK FTLUK (16) Marketing director organizations Belgium FTLB (17) Retail manager International FTI (18) Board chair FTLUS (19) Certification officer EXP1 (20) Expert in fair trade textiles EXP2 (21) Expert in fair trade food

in terms of FTO-corporate relationships, it has been sug- their core logics, but also focused on the mutual benefits of gested that power asymmetries may favour the corporate collaborating rather than on ideological conflict. Moreover, buyer’s market logic over those of the social movement: each of the inter-organizational relationships examined for example, in maximizing end margins by targeting high- here demonstrated dynamic persistence over significant end ‘ethical’ customers whilst driving down FT input pri- periods of time with several relationships lasting more than ces and terms of trade. This approach can result in a 15 years (e.g. FTOB–CORPB and FTOD–CORPD). reductionist model of FT that is stripped of its values-base The data analysis identified four initial core factors and commoditized into a buying option analogous with enabling the dynamic emergence and persistence of inter- other product choices (Hutchens 2009; Raynolds and organizational relationships across the power asymmetries Wilkinson 2007). In this scenario, retailers enact buyer- between corporate buyers and the FT movement: driven, modular, networks that operate outside • The presence of hybrid yet distinct logics on both sides of FT rules and certification, whilst shifting risks and costs of the relationship downstream in the supply chain to social movement actors • The presence of boundary-spanning discourses that can and producer organizations: for example, by ignoring the be interpreted by each partner according to its own logics standards around long-term contracts, pre-payments, or • A tolerance of the other partner’s logics within higher more favourable terms in their own negotiations. Recent strategic goals studies, however, have brought more nuance to this picture • The possibility for each partner to ‘co-create’ the by showing the complexity of fair trade supply chains (e.g. collaboration rules and practices Raynolds 2009) and the diverse aims and practices of both corporate retailers (Bezenc¸on and Blili 2009; Smith 2010) The data analysis also shows the importance of the FT and specialized FTOs (Huybrechts 2010a, 2012), standards in enabling or consolidating these four previous Building on this recent literature, the data examined here factors and mediating potentially conflicting logics across contribute to offering a more complex picture in which the relationship. Subsequent coding distilled these themes inter-organizational relationships do not simply reflect into two sets of issues that sustain these inter-organiza- power asymmetries at the level of conflicting logics. The tional relationships: factors that allowed for initial logic way in which both FTO and corporate interviewees framed alignment across the relationships and factors supporting their relationships clearly emphasized the distinctiveness of the dynamic persistence of relationships over time.

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Factors Allowing for Logic Alignment Across Inter- logic. We’re really in a partnership logic where organizational Relationships there’s a notion of giving and counter-giving (inter- viewee 8, FTOE) Hybrid Logics Thus, the first condition for the persistence of inter- When entering the mainstream, FTOs have developed a organizational relationships in the context of conflicting hybrid logic combining the social justice goals of the social logics appears to be a pre-existing engagement with hybrid movement with a market-oriented logic necessary for logics of relevance to the partnership itself. market penetration and growth. The resulting ‘market-dri- ven trade justice’ hybrid logic has facilitated the action of Boundary-Spanning Discourses the FT movement ‘in and against the market’ (Fridell et al. 2008; Taylor 2005). Such a shift has also led to the Another important condition for the persistence of inter- emergence of FTOs as ‘hybrid organizations’ (Battilana organizational relationships in this case was the develop- and Dorado 2010) evolving from NGO-like entities, ment of common discourses that could span the boundaries strongly embedded in civil society, towards social enter- between logics. The data analysis suggested that both prises combining, through various organizational models, corporate retailers and FT suppliers selectively used the the social goals set out by the movement with an explicit institutional material encapsulated in the FT standards to commercial market orientation (Huybrechts 2010a, 2012; generate multi-level meanings and discourses appropriate Nicholls and Cho 2006). to their own core logics. Specifically, three boundary- Several quotes illustrate the adoption of such hybrid spanning discourses were identified that facilitate inter- logics by FTOs, for example: organizational relationships at the logic boundary. These discourses originally emerged from the hybrid logic of We’ve been focusing much on the volume discussion market-driven trade justice noted above and were then […] but we’re also important in what it is about in standardized in the FT mark. essence: the introduction of new [producer] partners. The first boundary-spanning discourse is based upon the This is not a business language. It’s a development economic rationale for FT. Both partners recognized the language. But as a movement we constantly need to particular economic benefits of engaging in FT. However, find a balance between these languages (interviewee the corporation interpreted this discourse as a mechanism 6, FTOD) to increase sales for the company and respond to consumer For corporations, engagement with FT represented a needs, for example: clear CSR strategy (Seitanidi and Crane 2009) through We just provide what customers want. In that sense it which corporations integrated elements of social justice is astonishingly democratic. It is so customer focused logic into their discourse. The hybridization of corporate […]; decisions are made on a sector-by-sector basis market logics also took the form of declared modifications and are purely about ‘is this a line that customers are to their profit-making objectives. For example: interested in and which, therefore, can generate the It’s a Fair Trade product, so we shouldn’t start right profit level? (interviewee 9, CORPA) negotiating [about the prices]. It is a bit more In contrast, for the FTOs, growing sales represented a expensive but this is the point [of fair trade]. With means by which producer development could be acceler- these [fair trade] people, I’m not going to negotiate ated. Several respondents in FTOs specifically mentioned on the margins. […] I only ask one thing, it’s not to the mission-related value of increasing sales via building lose money (interviewee 15, CORPE) relationships with mainstream retailers, for example: No, this is not a classical commercial negotiation The main reason [for us to collaborate with retailers] [with FTOs]. We’re more open because these are is to increase the sales volume to improve the pro- particular companies. The collaboration is more sta- ducers’ development [opportunities], our economic ble […] and we’ve had very few de-listings [of fair viability and the further advancement of the Fair trade products]. We’re also less tough on the margins. Trade movement (interviewee 2, FTOA) And we don’t ask them to make a lot of investments on packaging and promoting their products (inter- The second boundary spanning discourse exploited viewee 12, CORPD) multiple meanings of quality (see further Renard 2003, 2005; Nicholls and Opal 2005). A focus on high quality And now the retailer we work with from the begin- and good quality control is central to the FT model and is ning is [CORPE], they are not in that [commercial] integrated in the capacity building and marketing

123 Sustaining Inter-organizational Relationships Across Institutional Logics assistance elements of Fair Trade standards (see also Re- ultimately jeopardize the relevance of working together. nard 2003; Nicholls and Opal 2005). For FTOs and inter- Whilst acknowledging some insecurity concerning the mediaries, quality reflected capacity building and future direction of their relationships, neither FTOs nor marketing assistance for marginalized producers to raise corporations indicated fundamental dissatisfaction or fears the cash value of their crops or products. However, for the of short-term conflict. From the FT perspective, there corporation, quality offered the prospect of access to pre- seemed to be both satisfaction about past and present mium customer segments and enhanced CSR strategy: achievements and some resignation about the logic disso- nances being the necessary consequence of ensuring main- [Fair Trade] also has quite a strong quality associa- stream engagement with FT to increase their impact with tion with it now. […] We have helped build for our small-scale producers. This acted as a powerful justification own ranges a real quality association with Fair Trade for continued collaborations with corporations in spite of because it is very much associated with finest because some logic dissonance. Moreover, this was explicitly seen as of the way it is presented and packaged. […]Sowe a process in which tolerance of conflicting logics was have been pushing it as a quality premium, if you essential. For example: like. (interviewee 9, CORPA) [FTOA] is very pleased to be working with [CORPB] The third boundary spanning discourse focused on sus- to help [two producer groups] expand into the tainability as a nexus of economic and social value creation mainstream market and gain further benefits (2010 narratives that also translated across logics. This is presented annual report of FTOA) as significant both to long-term producer development and as part of a wider set of issues concerning environmental When we work with [a corporate retailer], we also degradation and climate change. However, for corporate hope to promote more responsible business practices retailers the ‘sustainability’ of FT certified products was […]; it’s not because we have a commercial part- framed much more in terms of consistent access to scarce nership that we never criticise them; [but] we try to agro-, particularly where markets are growing do it constructively (interviewee 5, FTOC) rapidly (e.g. cocoa, organic cotton, sugar): At the corporate side, differences in values with FTOs What you are getting with Fair Trade is security of were expressed in terms of the profitability imperative supply. […] Very evidently a big part of [a big brand] disabling corporations to go too far towards the FTOs’ thinking to go Fair Trade […] was about sustain- logic. Yet the differences and potential conflict were ability of supply (interviewee 9, CORPA) presented as inevitable and justified by the gains in terms of corporate reputation and consumer engagement: For the FT movement, sustainability of supply was also presented as a commercial rationale for enhanced producer I don’t have a personal motivation for Fair Trade […] support: but I have a positive perception of it because con- sumers really recognize it. (interviewee 14, CORPE) It is much more around a real recognition of sus- tainability problems. […] So I think we are having If I had to decide [whether to buy fair trade products] different dialogues. Where—very crudely—it was on the basis of the market share [of these products], I ‘OK Fair Trade profession, what can you do to get wouldn’t buy them. But I know I need them. (inter- these campaigners off our backs?’—now it is ‘what viewee 13, CORPD) can you do to help us manage our supply chains I think you need a balance between what you sustainably?’ (interviewee 18, Faitrade International) believe in and what you do. You can have values Next this paper considers how such material is enacted to support poor producers etc. But if I only do that deliberately by organizations to enable the persistence of I’m sure we won’t survive in the commercial their relationships. competition. […] And there you need a clear vision of what you want in terms of performance and profitability. Because I’m sure if tomorrow I sell Factors Supporting the Persistence of Inter- only fair trade and organic my business disappears. organizational Relationships You must not be naı¨ve. You need to keep a bal- ance. (interviewee 15, CORPE) Tolerance of Dissonance Tolerance of potential logic conflicts was a significant In spite of evident goal differences and disagreements, none factor, but to enact dynamic persistence also required a of the interviewees indicated that these ‘dissonances’ might more proactive set of behaviours.

123 A. Nicholls, B. Huybrechts

Co-created Rules and Practices their own logics of action with the clear consent of the FTOs themselves. The presence of boundary-spanning logics noted above The latter acknowledged the need—and value—of co- facilitated alignment of conflicting logics across inter- creating institutional space with corporations: organizational relationships. However, for this to persist it We are, after all, trying to bring them [corporate became clear that each party needed to engage in active retailers] on a journey with us (interviewee 17, processes of the co-creation of meaning, as well as more FTLB) passive tolerance of dissonance. These actions enacted processes of co-creation in new ‘institutional spaces’ where From the corporate side, there was also some evidence logics were fluid and meanings could be decoupled from of active attempts to enhance FT practices as another key narratives and reshaped to a variety of strategic and feature of the co-creation of institutional space. Corpora- symbolic ends. For example, within the set of FT narra- tions also suggested that they had a role to play in dem- tives, corporations seemed to select and re-interpret spe- onstrating the social impact of FT and in ‘correcting’ the cific stories in their marketing communications: movement’s perceived shortcomings to co-create its legitimacy: Different companies respond to different aspects of Fair Trade. You know, a company that has a stronger So that’s what I mean about innovation. I am the one environmental commitment will be more interested in saying to [FTLUK] ‘have you got a mass balance the environmental standards of Fair Trade. A com- statement?’ And they are saying ‘no’. So we are pany that may have a commitment to women through coming up with our own one (interviewee 10, their foundation or through the particular business CORPB) that they do […] so what really resonates with them People in the Fair Trade world seem to be afraid of about Fair Trade is empowering women and they tell the word ‘profit’, but I want the farmers to be making that story (interviewee 19, FTLUS). a bit of money, making a bit of profit and not nec- Similarly, corporate websites and CSR reports also essarily relying on the premium. What else is the aligned market logics with key discourses in the FT stan- model delivering for workers and over the dards. CORPA, which focused on selling FT school uni- past five years? (interviewee 10, CORPB) forms, emphasized how the FT premium enabled producers This is also consistent with other studies that show the to send their children to school. CORPB, which oriented its gradual involvement of corporations in the governance of CSR agenda around environmental issues, focused in their the FT standards as a process of ‘co-negotiation’ of their CSR reports on how their support allowed producers to content and implementation (Reinecke 2010). By engaging invest in organic production for their cotton and fresh in actions that supported the development of FT standards, fruits. The corporate interviewees specifically emphasized FT organizations also improved their overall bargaining the congruence between some of the FT narratives and the position—a factor that supported the long-term resilience values set out in their own broader CSR agendas, for of inter-organizational relationships. instance: The policy of [CORPE] is to respect producers. The Discussion and Propositions goal is not to squeeze them. We always work that way (interviewee 14, CORPE) The analysis of the findings leads us to formulate concrete Corporate websites and CSR reports were widely used propositions that are likely to be relevant for different types to tell the ‘stories behind the products’ in a more explicit of asymmetric and cross-logic relationships beyond the way than on product packaging. Strikingly, the descriptions case examined here. of the producer organizations, the producer quotes, and First, the findings show how a pre-existing engagement even some of the pictures were borrowed from the FTOs’ with ‘hybrid logics’ was essential for the emergence of promotional material in order to benefit from the latter’s inter-organizational relationships across institutional logics legitimacy in terms of producer knowledge and support: and power asymmetries. For FTOs, entering the main- stream has typically required an engagement with institu- Besides the label we want to be able to tell the cus- tional logics that are distinct from their core values and tomers about the product’s story and in that [FTOE] rationales as a social movement (e.g. Mars and Lounsbury is much better than we are. (interviewee 13, CORPD) 2009; Taylor 2005). As a consequence, FTOs have devel- Corporate retailers made selective use of FT narrative oped a hybrid logic that integrates elements of both social material and its attendant institutional resonances to frame movement and market logics. This hybrid ‘market-driven 123 Sustaining Inter-organizational Relationships Across Institutional Logics trade justice’ logic has been encapsulated within the FT Proposition 3a Tolerance of conflict and power asym- standards initially developed by the FT movement metry by each partner is required for inter-organizational (Gendron et al. 2009; Reinecke 2010) and gradually relationships to be sustained over time. embodied by FTOs through their social enterprise identity Proposition 3b Tolerance is possible when each partner (Huybrechts and Defourny 2008). For corporations, is able to justify the collaboration in the context of higher- engagement with FT often took place in the context of the end strategic objectives. hybrid logics of CSR programs (Bezenc¸on and Blili 2009; Low and Davenport 2005). Evidence here suggests that Finally, the data demonstrate that both sets of organiza- partnering with the FT movement represented a clear CSR tions were willing to pursue the collaboration if they were strategy (Seitanidi and Crane 2009) through which corpo- able to co-create rules and practices at their common rations integrated elements of social justice logic into their boundary. FTOs built standards (i.e. collaboration patterns) discourse. The findings also show how the hybridization of which were ‘palatable to corporations’ (Crowell and Reed corporate market logics also took the form of declared 2009, p. 148) and malleable enough to enable corporations to modifications to their profit-making objectives. Thus, we interpret and frame them in a way that would be coherent propose that: with their own hybrid CSR logic. Corporations demonstrated an enthusiasm to bring business practices into FT processes Proposition 1 For relationships to emerge between to enhance the social movement’s effectiveness and legiti- organizations that draw on different logics and power macy as a market-driven model. Thus, it is suggested that: configurations, prior ‘hybridization’ of each one’s logics is necessary. Proposition 4 The possibility for each partner to co- Second, this analysis suggests that the alignment of create rules and practices at their common boundary potentially conflicting institutional logics can be achieved enables inter-organizational relationships to be sustained in the presence of pre-existing hybrid logics and with over time. institutional material that supports boundary spanning Finally, the findings show the transversal role of FT discourses. In this case, the latter drew upon the core FT standards in facilitating logic alignment and the persistence certification standard to cluster three boundary-spanning of the relationships over time. Thus, FT standards seem to discourses: economic development, quality and sustain- mediate the four aforementioned propositions by encap- ability. Each draws upon key elements of the FT stan- sulating instruments to deal with power asymmetries and dards—as embodied in the mark—but also demonstrates conflict of logics. In this sense, standards can be seen as how an institutional space has been co-created that allows ‘boundary objects’ bridging multiple institutional per- multiple interpretations to be developed by both sets of spectives or ‘social worlds’ (Fujimura 1992; Star and actors on either side of the logic boundary (Murray 2010). Griesemer 1989). Boundary objects have been categorized It is thus suggested that: as ‘artefacts of practice that are agreed and shared by Proposition 2 The development of ‘boundary-spanning communities, yet satisfy the informational requirements of discourses’ and the willing acceptance of multiple inter- each of them’ (Sapsed and Salter 2004, p. 1518) and pretations of each of them facilitates the persistence of ‘devices that are able to mediate different actor worlds’ inter-organizational relationships across institutional log- (Briers and Chua 2001, p. 238). Boundary objects have ics and power asymmetries. relevance here in two ways: first, they can be an instrument by which power relations are enacted and resisted (Yakura For inter-organizational relationships to persist, the 2002, p. 965); second, they facilitate the reading of alter- findings show how both sets of organizations managed to native meanings by different groups (Henderson 1991)to tolerate disagreement and potential conflict in the context enable collaborative work and promote inter-communal of achieving the key strategic objectives that were aligned negotiation. In this case, the findings show how the with their own hybrid logics. There was a general belief boundary-spanning discourses have been encapsulated amongst the FT interviewees that working with corporate within the FT standards to ‘institutionalize’ logic alignment retailers was the best way to realize the core mission of FT beyond each particular relationship. Thus, we propose that: to bring sustainable economic development to the maxi- mum number of poor producers, despite the inherent risks Proposition 5 The establishment of a boundary object of such interrelations (Smith 2010). On the corporate side, facilitates logic alignment across similar inter-organizational all interviewees recognized the strategic value of associ- relationships by (1) formalizing hybrid logics,(2)encapsulat- ating with the legitimacy of FT and the mark, despite ing boundary-spanning discourses,(3)providing justifications acknowledging some reservations and frustrations with that enable the tolerance of dissonance and (4) allowing inputs some of its hybrid logics. Thus, we propose that: and modifications by each type of partner (co-creation). 123 A. Nicholls, B. Huybrechts

The commercial impact of the FT standards and their defend its own core logic in its relationship with corporate attendant certification mark can be seen as a product of retailers, but also as an institutional repertoire enabling how actors based in distinct institutional logics and dis- interpretations by each organization according to its own playing asymmetric economic power distribution deliber- institutional logics. Thus, FTOs were able to invoke a set of ately exploited boundary-spanning discourses to manage operating rules grounded in social justice but which could conflicting logics and the potential for organizational dis- be re-interpreted by corporate retailers so as not to chal- sonance (Bartley 2007). It must be noted that recent evo- lenge their market logics and profit maximization strate- lutions of FT certification, in particular the ‘Fairtrade gies. A key contribution here is to highlight the role played Sourcing Program’ through which products containing only by formalized boundary objects, such as FT standards, in one amongst several possible FT ingredients can be mediating interactions across conflicting logics. This labelled FT, have been heavily criticized by FTOs and research shows how the notion of the boundary object can other FT stakeholders. Whilst certain FTOs (Gepa in be extended in a co-produced institutional space to go Germany and Oxfam Fair Trade in Belgium) have beyond functioning as a passive, instrumental mechanism announced that they would stop using the FT mark, it is too for the translation of meaning across ambiguity to an active early, however, to assess to what extent this potential participant in the process of stabilizing conflicting logics mistrust by FTOs may affect the global role of the mark as within a new interpretive space. The data in this study a boundary object used, amongst other roles, to mediate expand the boundary object construct by suggesting that collaborations between FTOs and corporate retailers. the FT certification generates a new fluid ‘institutional space’ around the logic boundary that does not translate meanings so much as allow parallel and simultaneous Conclusion institutionalization across and within stable core logics. This new vision of certification is also relevant to complete This paper has explored an under-researched phenomenon, the multiple functions of standards developed in the FT and namely the observed tendency for inter-organizational more broadly the certification literature (e.g. Abbott and relationships to persist under conditions of conflicting Snidal 2001; Reinecke et al. 2012). logics and power asymmetries without the emergence of a Third, the findings point to the importance of tolerance single, dominant, logic across the relationship. The data of dissonance in the context of higher strategic goals. The presented here demonstrate how the distinct, and some- literature suggests that as power is typically distributed times conflicting, institutional logics present in FTO-cor- unequally within fields and across inter-organizational porate relations can, in fact, interact closely under relationships (Hardy and Phillips 1998; Phillips et al. conditions of dynamic persistence, rather than conflict. 2000), the stability of boundary objects may be compro- Specifically, this research makes three new contributions, mised in the longer term, as power asymmetries enhance each of which has resonance beyond the specific case study and magnify dissonances between logics. A further key considered here. finding here is that logic dissonance does not necessarily First, this paper builds on recent work that brings threaten inter-organizational relationships if both parties nuance to the fatalistic view of FTO-corporate relation- accepted it as strategically tolerable. The data here suggest ships as necessarily synonym with dilution of the social that as long as the relationship served each party’s higher movement dynamics and cooptation by the market logic strategic objectives and reflected their core logics, disso- (Fridell et al. 2008; Jaffee 2010;Reed2009). More nances were tolerated. generally, this paper has demonstrated how actors This paper is exploratory and, as a consequence, offers grounded in distinct logics and with different levels of rich opportunities for new scholarship. For example, sub- power may collaborate effectively over time without the sequent research should test each of the propositions made weaker partner having to compromise their own core here with larger samples of organizations and in other logics. This challenges institutional theory in the sense fields in which social enterprises and for-profit businesses, that power asymmetry might usually be expected to allow or other organizational types rooted in different logics, corporate retailers gradually to impose their own market interact. Furthermore, the larger institutional context from logic across the relationship. The role of co-creating an within which standards emerged and developed has only ‘inter-organizational space’ (embodied in this case by a been sketched in here (cf. Abbott and Snidal 2001, 2009). certification system) in which logics can be rendered more In addition, it would be useful to examine the interactions fluid and flexible than in their core ideal-types has been between boundary objects and other actors (people and shown to be significant here. organizations) interacting at the logic boundaries in Second, the research shows the importance of standards enabling logic alignment and relationship persistence (e.g. not only as a strategic tool for the weaker party (FTOs) to Guston 2001; Marchington and Vincent 2004). Future 123 Sustaining Inter-organizational Relationships Across Institutional Logics research should also examine until what point conflict can Bartley, T. (2007). Institutional emergence in an era of globalization: be tolerated, for example by examining relationships dis- The rise of transnational private regulation of labor and environmental conditions. 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