Designing Dual-Purpose Organizations: The Role of Soft Governance

Although the phenomenon of dual-purpose organizations (DPOs)—market-based organizations that pursue both private (commercial) and broader social objectives simultaneously—has been explored extensively in prior literature, the role of organization design in addressing the distinct coordination problems inherent to DPOs has been largely overlooked. We develop a theoretical framework that conceptualizes how design considerations can influence organizational outcomes for DPOs. We identify two central coordination challenges faced by DPOs: an aggregation problem, in which heterogeneous individual preferences and organizational goals must be effectively aligned; and a consolidation problem, in which the dual-purpose nature of DPOs prevents the consolidation of goals into a single organizational meta-goal, resulting in nonhierarchical decision-making structures. We argue that formal organization design processes and mechanisms alone may fail to resolve these coordination problems, and we conceptualize the role and notion of soft governance, which we define as the agentic deployment of informal design mechanisms that shape an organization’s informal decision-making structure. Our core contribution lies in developing an integrative model of dual-purpose organizing that demonstrates how soft governance may complement formal organization design in alleviating the coordination problems inherent in DPOs, thereby supporting their stability and growth.