The notion of a “welfare mix” has two different points of reference. One is the variety of institutional arrangements of modern welfare states in, basically, capitalist democracies. This is primarily connected to a cross-country comparative perspective, very much influenced by classic pieces of research on the varieties of welfare states in general and related typologies (above all Esping-Andersen 1990; see also Arts and Gelissen 2002; Castles et al. 2011). We believe to know, for instance, that Scandinavian welfare states are much more state-centered and, accordingly, third sector organizations much less important than in, say, conservative or corporatist welfare states such as Germany or Austria or in liberal welfare states such as the United States (cf. Salamon and Anheier 1997). A second point of reference of the “mix” of welfare state arrangements is the combination of sector-specific institutions in the provision of welfare-related services in a given country. It is here where the notion of hybridity is particularly relevant since it is typically the arrangement of overlapping sectoral segments that characterize the “mix” in question (cf. Evers 2005 for an overview). Examples are tax exempted foundations in the field of education or science, private voluntary associations providing public goods such as social services of various kinds or private goods such as housing provided by public enterprises or cooperatives.

The aforementioned two perspectives necessarily have themselves overlapping empirical and analytical segments. What, in a cross-country perspective, appears as a particular national pattern of division of labor between the public, the private, and the third or nonprofit sector is shaped by path-dependent trajectories of institutional development that usually is being reflected in a national consensus of what is a legitimate governmental, private-for-profit, or third sector/nonprofit activity. Education, theaters, hospitals, and orchestras are governmental or municipal institutions in most of the European countries, while they are mostly private nonprofit institutions in the United States.

However, what we observe at the macro level, focusing on entire countries and their respective “welfare mix” in terms of institutional arrangements and division of labor between the private, the public, and the third sector, necessarily impacts on the actual relationship of those institutional components at the local level. The taken-for-grantedness of a once established division of labor between the state and the nonprofit sector, for instance, implies an asymmetric distribution of capabilities and strategic options when it comes to cooperation or competition in the strategic action fields (cf. Fligstein and McAdam 2011) in which gradual or accelerated retrenchment between the public, the private, and the third sector takes place (cf. [[paper “When doing good becomes an ‘affaire d’état’]] in the present issue). Getting a larger share of welfare provision may be relatively difficult for private voluntary organizations in Nordic countries, while it is likely to be easier in countries with a corporatist tradition like Austria or Germany. The reason is that ‘institutional entrepreneurs’ seeking advantage for their respective institutional segment have to pay tribute to the overall acceptance of a particular kind of division of labor between the sectors (cf. [[paper “Dangerous, Endearing or Domesticated: How Nordic people think …”]] in the present issue).

Institutional change and sector-specific retrenchment does take place though and the growing importance of third sector and civil society organizations in recent decades is itself a striking example. The notion of a “third” sector emerged since the early 1970s (cf. Etzioni 1973; Levitt 1973) precisely because the binary distinction between the private for-profit and the public sector did obviously not cover a wide range of existing and flourishing institutions that belonged to neither of those two main sectors. Tax exempted private foundations, quasi-public welfare associations, nonprofit cooperatives or small-scale voluntary associations active in day-care, preschool education, or environment protection initiatives are standard examples. Implicitly though, the notion of a “third” sector still carried the legacy of the binary definition of institutions being either public or private for-profit in nature. The “third” sector was interpreted as a response to market failure or government failure or both (Anheier and Seibel 1990; Hansmann 1980; James 1989; Rose-Ackerman 1986; Weisbrod 1988). It was through the emerging notion of “civil society” (cf. Edwards 2004; Ehrenberg 1999) and the growing political importance of non-governmental organizations (NGOs) that a positive definition of the “third sector” gained momentum since the early 1990s.

“Hybridity”, by contrast, did not emerge, as an analytical concept, from the discourse on sectors and related institutional segments but from institutional economics and the debate on various types of corporate governance. Williamson (1996) in a seminal book on “The Mechanisms of Governance” classified as “hybrids” a combination of governance mechanisms such as contractual arrangements combined with hierarchical authority. The innovative aspect of Williamson’s contribution was that he linked analytically institutional structures to what makes institutions ultimately work—the governance of human agency. Franchising, for example, is a combination of competition-based autonomy and hierarchy, the former the characteristic of a free market, the latter the core-ingredient of formal organizations just like public bureaucracies.

So Williamson’s crucial idea was that it is not “sectors” but particular mechanisms of governance that ultimately shape what humans do in a certain institutional setting. Still, however, this was based on the assumption of stable and predictable links between institutional forms such as private enterprises or public bureaucracies and typical or dominant mechanisms of governance such as competition and profitability in a market environment or hierarchy and written rules in the realm of public administration. In this school of thought, those links are connected to the notion of institutional choice in the sense of comparative advantages of certain mechanisms under certain circumstances, e.g., hierarchy involving less transaction costs than markets under the requirement of rapid adaptation (Ménard 2004; Williamson 1996).

In a similar vein, advanced third sector theory focuses on what Billis (2010, pp. 52–58) calls “principles” as characteristics of the private, the public, and the third sector, referring to the nature of ownership, the mode of governance, operational priorities, etc. The idea is that each sector is characterized by specific principles in support of specific mechanisms of governance. Managers in for-profit firms are expected to be committed to the principle of efficiency as a consequence of inter-firm competition just as appointed officials in public administration are expected to be committed to parliamentary legislation that is implemented through the mechanism of hierarchy or nonprofit managers to comply with the principle of volunteerism as a consequence of membership-based participation. This obviously reflects not only the combination of a structure-related and an agency-related perspective. It implicitly allows for the assumption that the linkage between the structure (or “sector”) and the related principle of “agency” (or governance mechanism) is not static but potentially dynamic in the sense that dominant mechanisms of governance may be joined or superposed by further governance mechanisms of uncertain compatibility.

The question of compatibility brings us to a core-aspect of the hybridity phenomenon. When we accept the idea once promoted by Friedland and Alford (1991) that the core institutions of modern society such as the capitalist market, the bureaucratic state, democracy, family, etc., shape individual preferences in accordance with a specific logic—such as accumulation of capital and commodification of human activity as the central logic of capitalism, rationalization and regulation of human activity by legal and bureaucratic hierarchies as the logic of the state, or participation and popular control as the logic of democracy—then one may also assume that, in a certain organizational setting, these logics may overlap and contradict each other (Friedland and Alford 1991, pp. 256–259). If we just replace, in terms of terminology, “logic” by “mechanism” one may expand Friedland’s and Alford’s concept to a variety of more or less compatible governance mechanisms to shape the reality of human agency in no matter what kind of institutional environment (cf. Leca and Naccache 2006; Thornton et al. 2012).

At the same time, however, this implies that the structure-oriented perspective remains important because it is the sectors from which the institutional logics originate in the first place and it is sector-specific institutions that form the structural framework of each mechanism’s relative legitimacy. Governance mechanisms, in other words, do not occur at random. Instead, they emanate from sector-specific logics.

Those logics, however, may compete with each other and competition may cause frictions and conflict. How to deal with them is as much an analytical challenge as it is a managerial one. For instance, there may be competition among hierarchically organized bureaucracies just as there may be informal hierarchy in the participatory environment of a civil society organization. In reality, however, those conflicting mechanisms enjoy various degrees of justification and legitimacy just in accordance with the relative dominance of a core-mechanism in a given institutional entity. Hierarchy in a civil society organization, e.g., a private voluntary organization, is harder to sell than participation. Conversely, participation is not easy to justify in an institutional setting where otherwise hierarchical fiat is dominant, e.g., in the military or a medical emergency room.

Manifest and Latent Hybridity

This implies a more differentiated notion of hybridity. Not only is there good sense in acknowledging hybridity being both a sector-specific and a mechanism-specific phenomenon but that it may also occur in a manifest and a latent version. Latent hybridity, however, is not only more difficult to detect than manifest hybridity but, accordingly, also more difficult to control. Which sheds light on related analytical and managerial challenges.

Abstract and theory-driven as it may sound, latent hybridity has been prominently analyzed in organization sociology and administrative science although not explicitly addressed as such. It is common knowledge that formal organizational features and the reality of organizational behavior may substantially differ. Organizations do have their manifest and latent functions (Merton 1968 [1957]) and they are, consequently, subject to unintended or counterintuitive effects of managerial activities or organizational designs unrelated to their manifest attributes. For instance, Philip Selznick in his seminal study “TVA [Tennessee Valley Authority] and the Grass Roots” (1949) analyzed how a public agency, behind the smokescreen of reformist ideology, became captured by private interests due to the ostensibly democratic mechanism of cooptation that in reality undermined the official goals of the organization. An even more famous contribution to the sociology of organizations with direct reference to what today is called ‘civil society organizations’ is Michels’ (1911) study on the pre-World War I Social Democratic Party (SPD) in Germany. Michels described what he termed “the iron law of oligarchy “referring to the informal and counterintuitive hierarchy in a party committed to the ideal of an egalitarian society and unfettered political participation.

Both of these influential books were studies in hybridity avant la lettre—of latent hybridity, to be precise. Selznick described the unintended consequences of the insertion of civil society elements into the realm of public bureaucracy. Michels analyzed the emergence of informal hierarchy and bureaucratization in what was supposed to be a participatory civil society organization. Which implies that actual hybridity may originate from informal rather than formal arrangements and that there is good sense in acknowledging the existence of latent hybridities that does not appear on the radar screen when just looking for manifest, formal, and official combinations of private, public, or civil society-based institutional forms.

Thinking in terms of institutional logics and mechanisms thus makes us more sensitive for actual hybridity beyond the visible overlap of formal cross-sectoral arrangements. However, overemphasizing informal hybridity and counterintuitive cross-sectoral overlap of governance mechanisms would serve no reasonable purpose either. Rather, it would leave us with an underspecified concept. After all, just in accordance with Merton’s fundamental definition, latent functions and mechanisms are the ubiquitous ingredient of any type of social structure so that defining hybridity based on latency alone would necessarily make it a quasi-ubiquitous and, consequently, unidentifiable phenomenon.

Therefore, I have been advocating a “middle ground approach” to the analysis of hybridity (Seibel 2015). On the one hand, the study of hybrids should not be restricted to formal cross-sectoral arrangements since that would neglect the role of informal institutional effects and latent combinations of sector-specific governance mechanisms. On the other hand , the “sectors” have to be taken seriously since they represent legally binding institutional arrangements and, accordingly, acknowledged patterns of legitimate sense making. Even when challenged or undermined by competing logics and mechanisms, these patterns remain valid as the bottom line of legitimacy and taken-for-grantedness of what is right and wrong in a given institutional environment. The rule of law and formal hierarchy remain the bottom line of what public sector officials can rely on when challenged by inter-agency rivalry or participatory ambitions of their respective societal environment. Profitability and survival of the firm are the bottom line for owners and managers of businesses in the private sector, however, inclined to acknowledge requirements of corporate social responsibility and requirements of political acceptance. Membership participation and grass root initiative remain the bottom line of legitimacy and institutional spirit of civil society organizations even when requirements of public accountability or managerial efficiency are equally undeniable.

Thinking in terms of manifest and latent hybridity is thus implicitly based on mutually compatible and analytically complementary structure-agency concepts. It comes close to Mario Bunge’s statement that, in a given social system, certain social mechanisms have priority over others (Bunge 1997, 2000) just as, according to Merton (1968 [1957]), manifest functions have priority over latent functions. Consequently, what remains important is focusing on the sector-specificity of dominant or manifest governance mechanisms and their overlap or combination as the most promising approach to the study of hybrids.

Analytical and Managerial Implications

The obvious analytical advantage of combining manifest and latent hybridity in one and the same research concept is that it widens the scope of potentially influential governance mechanisms in a given institutional setting while at the same time limiting the range of hypothetically relevant mechanisms.

In terms of structural analysis, one may, accordingly, set a sharper focus on the convergence of sector-based governance mechanisms and the frictions and potential pathologies that may result from their interaction. This may lead to research questions such as: Under what circumstances do participatory elements in the realm of public sector service provision turn into clientelism and/or agency capture? How productive or counterproductive is latent hierarchy in organizations and communities committed to equal rights and equal access to resources? When and how does inter-agency competition within the supposedly seamless hierarchy of accountability of the public sector turn into organized irresponsibility? When and how does inter-agency competition in the nonprofit sector stimulate non-governmental organizations to reduce their efforts to solve problems on whose persistence depends their own funding through state agencies or intergovernmental organizations? These questions combine empirical realism in reference to the co-existence of manifest and latent governance mechanisms with normative reasoning referring to the sector-specific prioritization of certain mechanisms over others and related degrees of strong or weak legitimacy.

Agency-related analyses, by contrast, may focus on the actual coping strategies in use when the convergence and interaction of various governance mechanisms come to bear in the form of managerial dilemmas. Justifying competitiveness in the participatory environment of civil society organizations or advocating client-participation and reciprocity in the hierarchical environment of a public agency requires tactical and communication skills that may decisively contribute to the actual viability of hybrid organizational forms.

For instance, just in accordance with research on intra-organizational diversity and related fault line management (Lau and Murnighan 1998; Hambrick et al. 2001; Thatcher et al. 2003), one may hypothesize that a combination of communication in the form of framing and reframing organizational issues (Jason 2011; Stanovich and West 1998; Vliegenthart and van Zoonen 2011) and coalition building based on specific incentive structures (Mintzberg 1983; Quinn and Voyer 1998) play an important role in managing hybrids. Board members of nonprofit organizations may perceive the introduction of market-style managerial components either as a prerequisite of organizational survival or as a threat to their own influence and power since managerialism necessarily strengthens the position of NPO-managers. Each of those perceptions implies a specific coalition-building strategy. Perceiving market-style managerial components as a prerequisite of organizational survival makes entrepreneurial NPO-managers the natural allies of board members. Perceiving market-style managerial efforts as a threat to the board’s power basis, by contrast, will motivate board members to seek alliances with paid staff and volunteers. Moreover, while an alliance of board members and NPO-managers will probably use communication strategies that frame the introduction of market-style managerial components as an indispensable contribution to strengthen the ultimate purpose and ideological goals of the respective nonprofit organization, an alliance of board members with paid staff and volunteers will probably use a framing pattern that denounces managerial reforms as an expression of quasi-capitalist ideology and thus inappropriate in a nonprofit environment.

In sum, the integral perspective on both manifest and latent hybridity implies greater awareness of the limits of conscious strategy building in a hybrid organizational environment in general. Managing hybrids clearly requires an appropriate understanding of the particular challenges connected to the special position at the interface of various sectors and related governance mechanisms. That understanding, just like any other understanding of managerial dilemmas, is not easy to develop, but in the case of manifest hybridity in the form of public enterprises, nonprofit organizations, or for-profit firms engaged in education under state regulation, it does not require a particular sensitivity for the hidden characteristics of diverging structural logics or governance mechanisms.

The nature of latent hybridity, by contrast, is its persistence behind a veil of ignorance. Accordingly, the frictions and faultlines of latent hybridity are much more difficult to detect and much more difficult to manage. Latent hybridity represents the very ‘zone of uncertainty’ that, according to Michel Crozier’s classic study on latent power structures in formal bureaucracies (Crozier 1963), is the target area of ambitious power brokers. Awareness of latent hybridity, however, difficult to achieve, is therefore a requirement of any successful managerial strategy, change management in particular.