Introduction

Economic sectors are generally divided into private, public, and nonprofit sectors. Each sector plays an important role in society; however, the divisions among these sectors create confusion in instances of hybridity. Despite the growing importance of hybrid organizations and related research (Brandsen et al., 2005; Kumar Hota et al., 2023; Pache & Santos, 2013; Salamon & Sokolowski, 2016; Vakkuri et al., 2021), conceptual confusion remain in cases of overlapping hybridity because of the ‘fuzzy’ boundaries of economic activity (Brandsen et al., 2005).

Due to some shortcomings in the current literature, developing a typology that bridges the types of hybridity along economic sectors is important in grounding future empirical research within an interdisciplinary conceptual model. In other words, establishing a conceptual model of hybrid organizations is relevant in developing appropriate classifications thereby advancing the knowledge within the field of study.

For instances, the nonprofit sector is characterized by what it is not and refers to the economy that falls outside both state and market economy (Gray et al., 2006). It dates back centuries as a product to protect the interests of humanity by “keeping at bay both state despotism and market tyranny” (Burawoy, 2005, p.288). As Burawoy (2005) explains, this tripartite division was blurred in the 20th century “with the fusing and overlapping boundaries of state, economy and society” (p.288). Specifically, the blurriness of sectoral boundaries has been augmented by the following examples of contemporary trends: nonprofits that must earn self-generating revenues to compensate losses from donations and grants; governments that offload social services to nonprofits through government contracts; governments that adopt New Public Management practices, thereby introducing market-like competition and privatization; and finally, for-profit organizations that are asked to bolster their corporate social responsibility practices, such as considering their stakeholder environments in their decision-making process, to better align with social norms and values.

This blurriness is what motivates this research. Specifically, this article is motivated by the lack of research of a conceptual nature on this topic (Kumar Hota et al., 2023) and the need to present a better model of economic sectors that integrates hybrid organizations (Young, 2012).

Considering this conceptual confusion, this interdisciplinary study aims to develop a more complete conceptual model of economic sectors that integrates hybridity. This article does so by integrating the institutional logics of ownership and funding to categorize the different types of hybrid organizations, while using the Canadian context to anchor the study. The developed typology is useful as it positions hybrid organizations along economic sector lines. The research question is as follows: How could hybrid organizations be classified into a conceptual model of economic sectors?

To answer this research question, the article first presents a summary of the different economic sectors, as well as the concepts of ownership, hybrid organizations, and institutional logics. In the following section, we present existing models and propose a parsimonious typology of economic sectors that links together private, public, and nonprofit sector hybrid organizations, while using the Canadian context to anchor the study. The final section concludes with a summary, limitations, and avenues for future research.

Literature Review

The focus of this research is on hybrid organizations across economic sectors. While it is also possible to sub-categorize hybrids, such as within social enterprises (see Defourny & Nyssens, 2016; Gordon, 2015; Santos et al., 2015) and within for-profit hybrids (see Ménard, 2022), there is already much research here in regards to hybridity (Kumar Hota et al., 2023). In this study, the research focuses on hybridity at an interdisciplinary level, for which the literature is scarce.

Overview of economic sectors

Generally, the three sectors of economic activity are the private, public, and nonprofit sectors (Billis, 2010; Defourny et al., 2021). Each sector houses organizations that achieve their mission in line with their economic purpose. Although these three sectors are generally accepted, some argue for a fourth citizen-level sector that encompasses families and households (Gray et al., 2006; Rask et al., 2020). This fourth sector covers informal (not formally organized) civic activism of short duration at the individual level (Rask et al., 2020). As the current study focuses on economic activity at the organizational level, any division at the individual level, while part of the broader society, falls outside the scope of the analysis. Meanwhile, others argue that this fourth sector falls within the nonprofit sector (Smith et al., 2006). Nevertheless, the typology that we propose covers organizations, and any informal voluntary economic activity would either fall outside the scope or be covered within the nonprofit sector.

In Canada, the public sector comprises governments at the local (municipal), provincial, and federal levels, and they are responsible for services such as public education, public health care, public transit, military, and law enforcement. This sector accounts for approximately 2 in 10 of all jobs (Mintz, 2023).

Canada’s private sector comprises both private and public corporations with a mission to earn returns for their investors. The country has over 1.3 million private employer businesses and 3.0 million non-employer businesses (Statistics Canada, 2022). It also has nearly 4000 public corporations (The Global Economy, 2023). The sector employs 6 in 10 of all jobs and 1 in 10 of self-employed workers (Statistics Canada, 2023).

The nonprofit sector is said to compensate for the limitations of the public and private sectors (Etzioni, 1973) and covers a vast array of heterogeneous organizations that offer social benefits. Nonprofit organizations are neither public sector organizations, nor for-profit sector organizations (Unerman & O’Dwyer, 2006) and are described as “the space between the state and the market economy” (Katz, 1999, p.76). Entities within the nonprofit sector are characterized as nongovernmental, not profit-distributing, self-governing, voluntary, and organized (Hall et al., 2005; Salamon et al., 2013). The Chartered Professional Accountants of Canada defines a nonprofit organization as “an entity, normally without transferable ownership interests, organized and operated exclusively for social, educational, professional, religious, health, charitable or any other not-for-profit purposes” (CPA Canada, 2023, preface, section 3(c)). This sector comprises 1 in 10 of all jobs in Canada.

In the literature, many terms have been used to refer to the nonprofit sector and its organizations; other terms include the third sector, independent sector, civil society sector (Abzug, 1999; Katz, 1999), and voluntary sector. Examples of nonprofit organizations include museums, labour unions, sports associations, recreational and social clubs, environmental protection agencies, civil rights associations, community and neighbourhood organizations, congregations, and day cares.

Ownership

A fundamental way to classify organizations within their respective economic sectors is based on the concept of ownership (Lienert, 2009). Ownership is defined as the “right to use, enjoy and dispose freely and completely of property, subject to the limits and conditions established by law”Footnote 1 (Ménard, 2020). Billis (2010) describes the ways ownership can be used to classify organizations into their respective economic sectors. Specifically, ownership is the formal right of owners to elect board members or political representatives of an organization.

In the corporate literature, Williamson (1990) argues for the applicability of property rights, among other theories, in determining organizational forms within for-profit organizations. Under a property rights approach to economic organization, organizations are distinguished from their external environment in terms of the authority to control and use resources (Alchian, 1965). Consequently, property rights defines ownership, for which the legal system establishes clear delimitations.

This property rights approach aligns with the concept of ownership because having the authority to elect board members is implicitly tied to the ability to control an organization’s resources. Therefore, ownership within economic sectors may be framed according to the following rationale:

  • First, the simplest form of ownership is found in the private sector, where owners (usually shareholders) elect board members during annual general meetings.

  • Second, public sector organizations are owned by a level of government via its citizens’ election of government officials.

  • Third, the nonprofit sector arguably has the most complex or unclear forms of ownership. In fact, this sector is characterized by an absence of formal ownership (lack of direct ownership), as organizations are de facto owned by a pool of active (often volunteer) members who elect board members. Members do not ‘own’ resources in the sense that they may use such resources at will and dispose of them for gain. Through the election of the board, members control how resources are utilized, which projects take priority in advancing the mission of the organization, and how the resources are disposed of in the case of liquidation (subject to the limits of the law). Membership is described within the letters patent filed during incorporation. It may be defined broadly as the status of anyone who attends the annual meeting of members or more narrowly as the status of those who meet specific criteria, such as payment of annual dues, as set out in the organization’s by-laws.

Hybrid organizations

Based on an organization’s ownership as described above, distinguishing between private, public, and nonprofit organizations should be relatively straightforward. Private sector organizations are characterized by share ownership aimed toward profit generation; public sector organizations are characterized by government ownership aimed toward the provision of public services (Lienert, 2009); and nonprofit sector organizations are characterized by ‘voluntary’ ownership aimed toward the provision of social benefits to members, communities, or society in general.

However, in practice, defining economic sector boundaries can be difficult because of hybridity. Hybrid organizations are often challenging to classify “because each is unique in terms of history, purpose and organization” (Koppell, 2003, p.2). Hybridity is an institutional niche in which organizations represent a gray zone in the delineation of economic sectors. Some definitions of hybrid organizations in the literature are as follows:

  • “…the activities, structures, processes and meanings by which organizations make sense of and combine multiple organizational forms” (Battilana & Lee, 2014, p.397).

  • “…structures and practices that allow the coexistence of values and artefacts from two or more categories” (Doherty et al., 2014, p.418).

The common theme between these two definitions is the coexistence of multiple logics or tensions within the same organization. Therefore, we describe a hybrid as an organization that exhibits a tension between at least two institutional logics.

The advent of hybrid organizations has increased the difficulty of distinguishing between what is inherently private, what is inherently public, and what is inherently nonprofit. This hybridity refers “to the interaction among public, private and civil society via distinct modes of ownership” (Vakkuri et al., 2021, p.246), where an organization is not purely capitalist (market), not purely socialist (state administration) (Etzioni, 1973), and not purely voluntary (nonprofit). By their nature, hybrid organizations are not a separate sector but exhibit the characteristics of two sectors; it is a tension between logics or competing demands (Brandsen et al., 2005; Cooney, 2006; Smith et al., 2013). In other words, hybrids do not fully fit into a single logic; they represent a blend or a tension in institutional logics (Alexius and Furusten, 2018a; Billis, 2010). As such, hybrid organizations are characterized by their location at the intersection of economic sectors. It should be highlighted that these distinctions between sectors are social constructions (Vakkuri et al., 2021) and instances of hybridity are not discrete but exist on a continuum (Shepherd et al., 2019).

Analysis

Private-public hybrid organizations

Hybrid organizations along the public-private sector are said to “combine the best of both worlds: public accountability and private efficiency” (Koppell, 2003, p.1). Many of the hybrids here align with the principles of New Public Management. Public-private hybrid organizations have two main types: public-private partnerships (PPPs) and state-owned enterprises.

PPPs are joint ventures between for-profit enterprises and government entities. PPPs generally refer to arrangements in which a for-profit enterprises supplies assets and services in return for a profit while a government entity provides the funding (Lienert, 2009). Examples of PPPs in Canada include Highway 407 in Ontario and the Confederation Bridge linking Prince Edward Island to mainland Canada, as well as many municipal projects for the construction of schools, water treatment plants, and sport complexes.

State-owned enterprises are government-controlled organizations with business-like modes because they generate revenue by collecting fees from users. They offer public services and can exist at the federal, provincial or municipal levels and have some independence relative to fully integrated federal agencies. These organizations are also called government corporations, public enterprises, government-sponsored enterprises, government contractors, and crown corporations. At the municipal level, state-owned enterprises generally deliver utility services (Voorn et al., 2017). Provincially, state-owned enterprises in Canada include liquor and cannabis businesses (e.g., Liquor Control Board of Ontario, Société québécoise du cannabis, and the New Brunswick Liquor Corporation) and electricity generation (e.g., Ontario Power Generation, Hydro-Québec and Manitoba Hydro). Federally, state-owned enterprises are called crown corporations; Canada has 47 such enterprises (Government of Canada, 2023a), including Canada Post, the Bank of Canada, the Royal Canadian Mint, and VIA Rail Canada. Internationally, private-public hybrid organizations include the World Bank and the International Monetary Fund.

Public-nonprofit hybrid organizations

The public-nonprofit sector intersection comprises hospitals, universities, colleges, and political parties. Hospitals, universities, and colleges offer social benefits beyond government services and tend to have large, highly structured organizations that rely heavily on government funding and generally operate as para-public or quasi-governmental organizations. These organizations are subject to greater scrutiny from a variety of government agencies (Salterio & Legresley, 2011). Hospitals, universities, and colleges are registered as nonprofit organizations. These organizations are sometimes formalized as registered charities or have one or several related foundations.

Political parties can be categorized as hybrid organizations because while they are registered as nonprofit organizations and collect dues from their members, they are closely associated with the functioning of the government, including the setting of policy directives and nomination of riding representatives.

Private-nonprofit hybrid organizations

The private-nonprofit sector intersection comprises social enterprises and cooperatives that differ from traditional nonprofit organizations (Salamon & Sokolowski, 2016) and are said to address a market failure (Santos et al., 2015). Social enterprises and cooperatives are hybrid organizations with objectives that go beyond profit maximization (Alter, 2007). The boundaries that separate these organizations from those in the private sector are blurred (Dart, 2004) as they have the “dual mission to achieve financial sustainability and create social value” (Doherty et al., 2014, p.420).

Social enterprises are defined as “organizations created to pursue social missions or purposes that operate to create community benefit regardless of ownership or legal structure” (Madill et al., 2010, p.141). They “operate on markets as a means to finance a social mission” (Alexius & Furusten, 2018b, p.v). Social enterprises may also be called social ventures, social entrepreneurships, commercial nonprofits, or benefit corporations. Examples of social enterprises include financial institutions that help fund social and environmental projects, technology companies that focus on recycling e-waste, and manufacturers powered by alternative sources (e.g., solar power) to fabricate construction materials (e.g., plastics and rubber tubing) (Re_Generation, 2023). These organizations generate revenue from their for-profit activities. Some social enterprises allow for profit distribution to a certain extent while others do not allow it altogether (Defourny & Nyssens, 2016).

A cooperative is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise” (International Co-operative Alliance, 2017). A cooperative may be seen as a form of social enterprise, wherein members have democratic control. Cooperatives may also be called mutuals. Examples of cooperatives include financial cooperatives (e.g., caisse populaires, credit unions, insurance), retail cooperatives (e.g., grocery stores, Mountain Equipment Co-op [MEC] prior to being purchased by a private equity firm in October 2020), service cooperatives (e.g., funeral homes and social housing), producer cooperatives (e.g., farming, fishing and agriculture), worker cooperatives owned by employees (Government of Canada, 2023b), renewable energy cooperatives, and pharmaceutical cooperatives (Defourny & Nyssens, 2016). Cooperatives may earn revenue from clients but may also collect membership dues and redistribute their earnings to their members through rebates or discounts based on the volume of transactions for a given fiscal period.

Relevant institutional logics

We use the theory of institutinal logics to categorize hybrid organizations. The principles of institutional logics state that organizations have logical orders between themes in which institutional logics are defined as “symbolic and material elements that structure organizational legitimacy” (Skelcher & Smith, 2015, p.433). Scholars have identifed various institutional logics of potential hybridity that warrant attention. Billis (2010) identifies the logics of owership, funding source, governance, operational priorities, and human resources. Young (2012) identifies the logics of ownership (legal form), funding sources, and governance. Pache and Santos (2013) identify the logics of ownership, mission, and governance. Alexius and Furusten (2018a) propose the logics of ownership (organizational form), funding sources, mission, and stakeholders. Table 1 summarizes the institutional logics identified above.

Table 1 Summary of relevant institutional logics.
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Among the institutional logics presented above, ownership (organizational form) and funding are important institutional logics in identifying ideal or normal types of logics and their alignment with economic sectors. Ownership was described in the previous section as either being of share ownership within the private sector, government ownership within the public sector, or voluntary ownership within the nonprofit sector.

Funding sources was retained as the second logic and is explained as follows: private sector organizations are mainly funded through revenues generated from customer sales, public sector organizations are mainly funded through taxation and government transfers, and nonprofit organizations are mainly funded through donations, membership dues, and grants. The funding source may also be tied to resource dependence theory. Resource dependence theory focuses on the pressures organizations face to obtain external funding so as to secure the organization’s survival (Pfeffer & Salancik, 1978). The focus on resource dependence is supported by Besharov and Smith (2014, p.369) who state that “an organization’s pattern of resource dependence can further influence logic centrality”. Resource dependence does not mean that organizations rely exclusively on these funding sources, but that it is a funding source that is significant and distinguishes it from other types of organizations.

Other institutional logics were found to be less relevant to our analysis. Governance systems are too subjective and the salience of stakeholders to each type of organization is debatable. The institutional logics of stakeholders and governance can also be combined because as Young (2012, p.42) argues: “governance is essentially about stakeholders who exert varying degrees of organizational control and who may have varying interests and goals”. As well, the human resources and operational priorities are also too subjective for classification.

Therefore, consistent with Koppell (2003), ownership and funding source (through resource dependence) appear to be the most relevant in identifying hybrid forms of organizing.

Existing conceptual models

Before developing a conceptual model, we review and summarize the current representations in the literature.

No single classification model can meet all possible purposes because models are a simplification with a specific objective. Although some economic sector models have been presented in the literature, the place of hybridity among the three sectors remains unclear. The models previously conceptualized by scholars to classify organizations within economic sectors are described hereafter.

The first group of conceptual studies on hybrid organizations includes those by Pestoff (1992), Brandsen et al. (2005), Gray et al. (2006), and Defourny and Nyssens (2016). Pestoff (1992) describes four sectors, with the nonprofit sector being central to all other sectors, and presents the ways in which the nonprofit sector interacts with the others. Brandsen et al. (2005), extending the earlier work by Pestoff (1992) and others, characterize the nonprofit sector as a hybrid itself and distinguish four types of nonprofit organizations: nongovernmental organizations, unions, community or grassroots, and professional or market-based organizations. Gray et al. (2006) similarly consider civil society as central to the market, state, and family economies. Defourny and Nyssens (2016) categorize types of social enterprises, excluding other types of hybrids. These models do not address the place of hybrid forms of organizing across all economic sectors.

Next, Koppell (2003) identifies types of private and public organizations through categories of ownership and funding, omitting the nonprofit sector and the role of hybridity along the public-nonprofit axis. Alternatively, Salamon and Sokolowski (2016) and Crawford et al. (2018) identify hybridity between private and nonprofit spaces but omit hybridity with the public sector. These models do not integrate all three economic sectors concurrently, focusing on only two sectors.

Finally, Billis (2010) identifies nine zones of hybridity among the three economic sectors, arguing the possibility for hybrid organizations to exhibit characteristics of all three sectors simultaneously. The analysis does not adequately classify the tensions in institutional logics that form hybrids.

After analyzing existing models, we find that the current conceptualizations insufficiently integrate hybrid organizations, do not address all three sectors concurrently, or do not identify specific types of hybrid organizations within their models (i.e., they leave out important details about the types of organizations that exhibit hybridity). As such there remains unanswered questions when it comes to categorizing hybrids, and an enhanced conceptual model is warranted.

Proposed typology

It is possible to categorize organizational forms into a typology. A typology is a social science tool of conceptual classification with the primary function of reducing complexity (Bailey, 1994) and are useful in grounding theory. Table 2 presents this typology of organizational forms at the intersection of the institutional logics of ownership and funding (resource dependence).

Table 2 Typology of organizational forms through institutional logics.
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In summary, for-profit enterprises, government entities and nonprofit organizations represent an alignment in institutional logics of ownership and funding: for-profit enterprises are part of the private sector because their logics align through their funding (revenues from clients) and shareholder ownership; government entities are part of the public sector because their logics align through their funding (taxation and transfers) and their government ownership; nonprofit organizations are part of the nonprofit sector because their logics align through their funding (donations, dues, and grants) and their voluntary ownership.

In the case of hybrid organizations, they represent a tension in institutional logics between their ownership and their funding. Specifically, along the private-public axis, PPPs rely on public funds while generating profits for private (shareholder) investors, and state-owned enterprises rely on revenues from clients through user fees while offering public services. Along the public-nonprofit axis, hospitals and universities are nonprofit (voluntary) owned and offer social benefits through health care and education while being publicly funded through government transfers, and political parties are quasi-government owned and offer public services while relying on membership dues and donations. Along the private-nonprofit axis, social enterprises are nonprofit (voluntary) owned and offer social benefits while funding their activities through private profit-generating activities (revenues from clients), and cooperative are profit generating for their members (who act like investors) while relying on membership dues.

It is worth reiterating that despite the use of discreet categories in the typology, the dimensions exist on a continuum as there exist in reality significant overlapping grey areas.

Furthermore, Fig. 1 conceptualizes an economic sector model by type of organization, wherein hybrid organizations are shaded grey. Where appropriate, other visual schematics of economic sectors as presented in the prior section have been integrated into this figure. Care was taken to make the figure as parsimonious as possible.

Fig. 1
figure 1

Economic Sectors by Type of Organization.

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Conclusion

This conceptual study is based on an interdisciplinary review of the literature and identifies a gap in existing models for describing economic sectors and their hybrid classes. Due to some shortcomings in the current literature, developing a conceptual model that bridges the types of hybridity along economic sectors is important in grounding the empirical research within an interdisciplinary conceptual model. In other words, establishing a conceptual model of hybrid organizations is relevant in developing appropriate classifications thereby advancing knowledge within this field of study. Therefore, the study aimed to develop a more complete conceptual model of economic sectors, and does so by integrating the institutional logics of ownership and funding (resource dependence) to categorize the tensions found within hybrid organizations.

Drawing from the tensions in institutional logics, this study goes beyond a descriptive review of the current knowledge of hybridity and contributes to the advancement of the domain by proposing a parsimonious typology for each type of hybrid organization found within a Canadian context. Through this representation, this conceptual model helps clarify how different types of hybrid organizations can be understood through tensions in institutional logics along the three economic sectors and provides examples of hybrid organizations within each category. By exploring the concept of hybridity, this study identifies six types of hybrid organizations: public-private hybrids, such as PPPs and state-owned enterprises; public-nonprofit hybrids, such as hospitals and political parties; and nonprofit-private hybrids, such as social enterprises and cooperatives.

Hybrid organizations represent a tension in institutional logics between their ownership and their funding. Specifically, along the private-public axis, PPPs rely on public funds while generating profits for private (shareholder) investors, and state-owned enterprises rely on revenues from clients through user fees while offering public services. Along the public-nonprofit axis, hospitals and universities are nonprofit (voluntary) owned and offer social benefits through health care and education while being publicly funded through government transfers, and political parties are quasi-government owned and offer public services while relying on membership dues and donations. Along the private-nonprofit axis, social enterprises are nonprofit (voluntary) owned and offer social benefits while funding their activities through private profit-generating activities (revenues from clients), and cooperative are profit generating for their members (who act like shareholders) while relying on membership dues.

This article offers a valuable synthesis in the form of a typology that reduces organizational forms to two dimensions (institutional logics), allowing for the distinction of different types of hybrid organizations. Expressing a concept pictorially also helps to provide a clearer understanding of the phenomena. The synthesis will allow researchers to differentiate between different types of hybrid organizations for future empirical research.

This conceptual work also provides a summary of the literature that will benefit scholars interested in understanding the role and place of hybrid organizational forms. Although research in this field may not be mature, hybrid organizations represent an area of growing interest. Through the conceptual model developed, this study will provide a basis through which scholars can better understand, analyze and teach in the field of hybrid organizations.

As for limitations, the classification produced focuses on the Canadian context and the institutional logics of ownership and funding. This representation does not mean that we have uncovered all possible types of hybridity, and so the inclusion of more or other characteristics may result in different categorizations. Although, a complete list of all types of hybrids is likely an impossibility and a typology of more than two dimensions becomes challenging to synthesize (Bailey, 1994). Also, our conceptualization does not allow for hybrids exhibiting three tensions, even though, as Billis (2010) notes, it could be a possibility.

It must also be acknowledged that the categorizes were presented as dichotomous, but in reality the classes of hybridity exist on a continuum. Categories are not discreet as some hybrids may lean more towards one sector than another. For example, there is much research on social enterprises that sub-categorize these organizations as either being more social versus more entrepreneurial (Defourny et al., 2021). These sub-categorizes have fallen outside the scope of this study.

For future research, the representation developed offers a conceptualization that can and should be refined or revised through empirical or conceptual investigations of different international contexts. Future research may also investigate the stability of hybrid organizations over time (as also suggested in Besharov and Smith (2014)), the forces pushing towards change, and the institutional and contingency factors that influence the choices toward or away from specific modes of hybrids (e.g., the purchase of the Canadian retail cooperative MEC by a private equity firm in October 2020).