677170

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OAEXXX10.1177/1086026616677170Organization & EnvironmentHart et al.

Editorial
Organization & Environment
2016, Vol. 29(4) 401­–415
Poverty, Business Strategy, and © 2016 SAGE Publications
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DOI: 10.1177/1086026616677170
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Stuart Hart1, Sanjay Sharma1, and Minna Halme2

Abstract
The past 15 years have witnessed an exponential growth in business activities aimed at serving the
needs and increasing the well-being of disenfranchised individuals in low-income communities.
Thousands of new business initiatives, development institution programs, and innovative
investment funds focused on poverty alleviation have emerged during this time. Similarly,
since the late 1990s when Prahalad and Hart first coined the term Bottom of Pyramid (BoP),
and suggested a new, enterprise-based approach to poverty alleviation, there has also been a
steady rise in research on business and poverty. A whole new lexicon emerged to describe this
phenomenon, including phrases like “inclusive business,” “subsistence market places,” “frugal
innovation,” and “impact investing.” Unfortunately, management theory and research have not
advanced at the same pace with the BoP business revolution, and consequently knowledge
about parameters for successfully integrating business, poverty alleviation and sustainable
development still remains ambiguous.

Keywords
sustainable development, poverty, business strategy, environment, stakeholders, innovation,
inclusive business, low-income communities, frugal innovation

What We Know From Extant Management and Organizational

Theory
Existing management theory does not adequately explain how firms can generate local knowl-
edge and innovate to address potential customers with unmet needs and communities in unfamil-
iar contexts such as rural villages and urban shantytowns. Indeed, the Bottom of Pyramid (BoP)
represents a significant departure from current strategies, introducing the need to engage com-
pletely new sets of “fringe” stakeholders (Hart & Sharma, 2004), and for major disruptive inno-
vation in products, technologies, and business models. Neither the stakeholder nor the innovation
literatures appear to adequately explain this phenomenon. We explore briefly below the gaps and
blind spots in these literatures before proposing a set of constructs that help predict successful
BoP business innovation and provide a roadmap for this special issue.

1University of Vermont, Burlington, VT, USA

2Aalto University, Aalto, Finland

Corresponding Author:
Stuart Hart, University of Vermont, Grossman School of Business, 55 Colchester Avenue, Burlington, VT 05405.
Email: stuart.hart@uvm.edu
402 Organization & Environment 29(4)

The Stakeholder Literature

Despite the original stakeholder argument of Freeman (1984) that the firm should consider in its
strategic management process not only those groups who can affect its operations but also those
who are affected, the resulting literature on stakeholder management has focused mainly on pri-
mary groups such as investors, employees, customers, suppliers and the government who are
powerful and key to success of the current business model (Frooman, 1999; Hillman & Keim,
2001; Mitchell, Agle, & Wood, 1997).
However, since the primary/influential economic stakeholders have a major stake in the
survival of the current business model, such stakeholders may be threatened by disruptions to
current products and businesses because such changes may also require major changes in
their own operations as well. As a consequence, focusing on primary stakeholders with vested
interests in the current business and products locks the firm into incremental and sustaining
innovations in existing markets rather than radical and disruptive innovations that may be
necessary for entry and success in the BoP and could creatively destroy the current business
(Christensen, 1997; Hart & Christensen, 2002) and negatively affect the current stakeholders.
This despite the possibility that such disruptive innovations also have the potential to build
future competitive advantage in the BoP space and eventually become “reverse” innovations
in middle- and higher income markets (Hart & Christensen, 2002; Immelt, Govindarajan, &
Trimble, 2009).
The bulk of the extant stakeholder literature makes either resource dependence or moral argu-
ments to manage stakeholders for cost reduction, differentiation, or legitimacy in current mar-
kets. The potential for engaging diverse and fringe stakeholder networks for understanding
“future change” (Freeman, 1984, p. 46) by tapping into the well of evolving knowledge in net-
works of stakeholders that exist in BoP contexts and are beyond the firm’s current grasp is not
sufficiently addressed in the literature.

The Innovation Literature

The innovation literature has also emphasized the importance of current customers and suppliers
as sources of novel concepts and new ideas. Von Hippel (1988), for example, stresses “lead
users”—customers whose present strong needs will become general in a marketplace months or
years in the future—as key sources of innovation. By tapping into the most demanding and
sophisticated customers, he argues, firms can effectively forecast how the market will develop
over time, and develop new technologies, products, and services accordingly.
The primary focus of the innovation literature until recently has been on developing new
opportunities in current markets by generating sustaining or incremental innovations. But over
the past decade, research on disruptive innovation in radically different or new markets for future
competitive advantage has begun to emerge (Cunha, Rego, Oliveira, Rodado, & Habib, 2014;
Hart & Christensen, 2002; Radjou, Prabhu, & Ahuja, 2012; Pansera, 2013).
It has become increasingly clear that understanding knowledge transfers within more stable
networks of organizations and/or social entities (Gulati, 1995; Kale, Singh, & Perlmutter, 2000),
may not be enough to generate successful innovations for the BoP. The emergence of “open”
innovation, which brings external constituents and stakeholders into the innovation process via
online technology platforms offers significant potential for addressing emerging and BoP mar-
kets by overcoming the gaps in conventional internal innovation processes adopted by firms
(Casado & Hart, 2015; Chesbrough, 2005).
In summary, the stakeholder and innovation literatures have focused largely on the exploitation
of intraorganizational knowledge, or relationships with current alliance partners, suppliers, or cus-
tomers as the basis for identifying opportunities for new technology and product development.
Hart et al. 403

The dynamic process and outcomes of strategy co-development and open innovation with external
actors necessary for BoP success has not been examined sufficiently.
This special issue aims to address the gaps noted above. Before discussing the special issue
articles and their specific contributions, we briefly provide historical background on the BoP
business idea and how this informs the structure and organization of this special issue.

Evolution of the BoP Concept

Prahalad and Hart (2002) proposed that the poorest four billion people in the world could be
reframed as a potential market to be served rather than simply a large population of dependents
in need of aid and philanthropy. They made the business case for large, multinational corpora-
tions to develop strategies focused on serving and lifting the underserved. Early BoP business
models such as Hindustan Unilever’s single-serve sachet packaged foods and hygiene products
distributed by low-income village women, or Cemex’s Patrimonio Hoy initiative facilitating low-
income households to build and improve their own housing, became iconic in the popular press
and academic outlets (Prahalad, 2005).
The core idea of the BoP proposition—that an entrepreneurial approach to poverty alleviation
was possible on a large scale—spread rapidly to other adjacent domains including social entre-
preneurship, impact venturing, and development finance. The U.N. Development Programme
(UNDP), for example, launched the Growing Inclusive Markets program in 2004, planting the
seed for an entire family of derivative concepts such as inclusive growth, markets, and innova-
tion. Taken together, these initiatives call for the redesign of markets and innovation processes to
yield more benefits for the poor and marginalized (UNDP, 2008).
Compared with the more corporate focus of the original BoP concept, the inclusive market
idea expanded the scope to include governments and other institutions, and was less biased
toward large corporations as the key actors. Indeed, a UNDP inclusive market report (2008) pre-
sented enterprises of all sizes and types as examples of inclusive business. This idea spread to
other institutions such as the IDB, IFC, and the World Bank. Gradually, the BoP idea came to be
understood as any form of business that created or enhanced well-being of the underserved at the
BoP (Halme, Lindeman, & Linna, 2012).
Yet despite all this research over the past 15 years, the unfortunate truth is that most inclusive
business ventures and BoP corporate initiatives have either failed outright, been converted to
philanthropic programs, or achieved only modest success at great cost. Few have taken root,
gathered significant commercial momentum, or achieved substantial scale (Simanis, 2012). Most
research to date has been case based, or practitioner oriented. Little empirical work with larger
data samples has been done, nor have there been many systematic efforts to evaluate the state of
knowledge to guide future study in the domain (Kolk, Rivera-Santos, & Rufin, 2014).
Such lack of traction and progress can be explained in part by the incremental approach
taken by many of the early BoP ventures and corporate initiatives. This led to the distinction
between a “BoP 1.0” and “BoP 2.0” approach (Hart, 2005; London & Hart, 2011; Simanis &
Hart, 2008). The former, which has been the dominant approach to date, focuses on adapting
existing products, reducing price points and extending distribution to previously underserved
or unserved customers, often with NGO partners to compensate for the lack of prior experi-
ence. Such a “tap the underserved market” approach has proven less than sufficient. Some have
even suggested that this approach is nothing more than the latest form of corporate imperialism
(e.g., Karnani, 2006). The BoP 2.0 approach in turn stresses the importance of co-creating
products and compelling value propositions with underserved communities, innovating from
the bottom-up, leapfrogging to environmentally sustainable technology, and creating a dedi-
cated set of metrics and timelines suited to the unique features of the underserved space (Hart,
2015; London & Hart, 2011).
404 Organization & Environment 29(4)

Process Focus Content Focus Outcome Focus

(e.g. Methods, Approaches ) (e.g. Strategy, Structure) (e.g. Impact, Performance)

Grassroots/
Social Innovators More likely to be “Born BoP” means Focused strongly
embedded naturally no early challenges on the local
Entrepreneurship or conflicts in focus social dimension
(New Ventures)

More likely to
Corporate Strongly challenged Challenged to
Intrapreneurship require new tools,
by incumbent bias, frame impact and
(Local and MNC) techniques, and
foreignness, and environment in
systems for
System misaligned incenves locally relevant
Innovaon co-creaon
terms
(e.g. Context, Policy)

Figure 1.  Conceptual map: Charting the terrain and challenges.

A Conceptual Map of the Terrain

The experience with BoP/inclusive business over the past 15 years thus reveals a need for inno-
vation in three broad domains: Process (i.e., the importance of co-creation and embedding in the
local context), Content (i.e., strategy, structure, and business model innovation), and Outcome
(i.e., impact metrics and assessment).
Furthermore, we have seen that businesses entering and operating at the BoP may be broadly
classified as (a) those that emerge from the BoP or are created specifically to address needs iden-
tified at the BoP—Grassroots Innovators, Social Entrepreneurs, or For-Profit New Business
Ventures and (b) existing corporations that enter the BoP with intrapreneurial initiatives to iden-
tify and address the needs of the underserved—traditional Corporations operating nationally or
multinational corporations (MNCs) with operations in developing nations. There is also the mat-
ter of the larger System and context within which the BoP business is embedded, this includes the
policy environment and the ecosystem of stakeholders, potential partners and complementary
players available.
Combining the three domains of innovation with the range of business actors involved results
in a conceptual map of the terrain that can serve as a guide to this special issue (see Figure 1).
The BoP businesses that emerge specifically to address unmet needs at the BoP (i.e., the top
two rows) should be more embedded and have a better understanding of the needs and the busi-
ness landscape and the environment at the BoP. Corporations, on the other hand, are more likely
to be entering a new context outside of their comfort zone of existing technologies, markets,
products, and business models. The BoP brings corporations face-to-face with stakeholders and
ecosystem players (including potential customers) who may be adversarial or unwilling to ini-
tially engage with the firm. It would thus seem that these firms could benefit greatly from BoP
2.0 approaches but would be more naturally inclined to default to BoP 1.0 approaches because
they are more familiar and leverage existing corporate competencies.
Usually businesses that emerge from the BoP are founded by entrepreneurs motivated to
address a combination of economic and social needs that they experience firsthand because they
are embedded in the context of such markets. Even in the absence of such intentional “social
value” creation, the business models of local grassroots entrepreneurs are often premised on
removing key constraints in the local environment. Such ventures thereby tend to connect natu-
rally to local communities’ economic development needs in terms of sustenance, self-esteem, and
Hart et al. 405

Process Focus Content Focus Outcome Focus

(e.g. Methods, Approaches ) (e.g. Strategy, Structure) (e.g. Impact, Performance)

Grassroots/
Social Innovators
Viswanathan &
Entrepreneurship
(New Ventures)
Venugopal
Angelli & Jaiswal Duke
Corporate Nahi
Intrapreneurship
(Local and MNC)
Reffico & Poveda
System
Innova€on
(e.g. Context, Policy)

Figure 2.  Conceptual map: Special issue domain foci.

freedom of choice (Gupta, 2016; Sinkovics, Sinkovics, & Yamin, 2014). Corporations, on the
other hand, may struggle to integrate their more technologically and organizationally sophisti-
cated ways of operating with the on-the-ground realities of the BoP context. This includes the
challenge of co-creating, embedding, and translating the benefits they might bring (socially and
environmentally) into value for local people and communities.
Yet while grassroots and social entrepreneurs may have extensive knowledge of local stake-
holders and needs, they are also likely to lack the most advanced technologies, organizational
systems, and executional capabilities to scale successfully. Corporations would be more likely to
possess these executional and scaling capabilities, but suffer from the liability of foreignness or
“outsidership” (Johanson & Vahlne, 2009; London & Hart, 2004) in the BoP context. Indeed, for
outsider companies, evidence suggests that it might easily take 5 years or more to build the local
networks necessary to learn about the needs and aspirations of BoP customers and stakeholders
(Sinkovics et al., 2014).

Situating the Special Issue Articles

We use the three domains (columns) of Figure 1 as the organizing framework for this special
issue (see Figure 2). We briefly introduce each of the three domains (i.e., Process, Content, and
Outcome) and place the articles in this special issue in the context of the domain they best repre-
sent and contribute to. We then close with some thoughts about gaps and opportunities for future
research.

Process: Co-creating for the Local Context

Successful innovation for the BoP requires that firms tap into new types of knowledge to develop
products and business models and to meet the challenge of conflicting economic, social, and
ecological stakeholder demands in these new contexts. This knowledge may include the follow-
ing: (1) An in-depth understanding about the needs and aspirations of the potential customers in
these communities who are either currently unserved/underserved by inferior and/or unsuitable
products. (2) A deep understanding about the complex interactions between the social and envi-
ronmental concerns facing local communities, citizens, local governments, NGOs, and other
stakeholders in these contexts. Often, economic issues are intertwined with social and
406 Organization & Environment 29(4)

environmental issues in these markets and the priority accorded to, and the dimensions of such
issues, are unique and different in each context. (3) An understanding of the factors that will
afford credibility and build long-term relationships with stakeholders in contexts that are very
different culturally, economically, and socially from those to which the firm is accustomed. Such
credibility and relationships are critical for sustainable growth and for maintaining knowledge
flows for continuing competitive imagination and disruptive innovation.
Generating knowledge for disruptive innovation that may be required for the BoP is different
from the traditional knowledge-based view in two ways. First, in radically uncertain environ-
ments, the firm is looking for unrelated opportunities to change and redefine its business. The
sparking of new possibilities is the main objective. Second, firms need to overcome the liability
of past experience (Zahra & George, 2002) and seek to explore information that tempers the
relevance and importance of their past experience and success because they are pursuing new
environments and business models (Hart & Sharma, 2004).
In the uncertain environments that are characteristic of the BoP, firms need to allocate more
resources toward exploration (Lant, Milliken, & Batra, 1992). Exploration “generates new,
unsettled knowledge with potentially high but uncertain returns” and “is potentially relevant to
several parts of the organization” (Schulz, 2001, p. 663). Therefore, in exploration that is central
to developing business models for the BoP, the focus is on gathering new information that is
broad and general on many different ideas and alternatives rather than on analyzing feasibility of
any one alternative or opportunity. Such exploration calls for new methods as conventional infor-
mation channels are seldom available for the BoP demographic (Halme, Kourula, Lindeman,
Kallio, & Korsunova, 2015). Diverse and distant stakeholders add value in exploration because
strong ties characteristic of suppliers, customers, and alliance partners are constraining, provide
redundant information, and limit a firm’s “openness to information and to alternative ways of
doing things, producing forms of collective blindness that sometimes have disastrous effects”
(Nahapiet & Ghoshal, 1998, p. 245). Extending and expanding the breadth and depth of knowl-
edge exposure positively influences a firm’s propensity to explore new and related knowledge
(Van Wijk, Van den Bosch, & Volberda, 2001).
Therefore, to generate flows of external knowledge in BoP contexts, firms need a dynamic
capability to anticipate the need for, and maintain an alignment between its value creating strat-
egy and dynamic and radically different environments they encounter as they globalize. Hart and
Sharma (2004) proposed Radical Transactiveness as a dynamic capability which enables a firm
to systematically identify, explore, and integrate the views of stakeholders on the “fringe”—the
poor, weak, isolated, nonlegitimate, and even nonhuman (natural)—for the express purpose of
building imagination about future competitive business models. Engaging stakeholder groups in
diverse global and local contexts helps firms understand the dynamics of social equity, environ-
mental preservation, and value creation in order to overcome their liability of outsidership in
low-income emerging markets (London & Hart, 2004; Sharma & Vredenburg, 1998).
Significant work has been done to develop practical tools and approaches necessary for firms
to engage in Radical Transactiveness and co-creation for the BoP (London, 2016; Simanis &
Hart, 2009; Simanis, Hart, & Duke, 2008). Yet, while seemingly crucial to BoP business success,
co-creation processes between business firms and key stakeholders in low-income contexts have
remained empirically understudied and the concept of co-creation has taken on different perspec-
tives and meanings in the literature.
This special issue aims to fill some of the void in this critical domain of BoP business research.
Nahi’s article in this special issue provides a comprehensive review of the literature on co-creation
and develops an organizing framework to better guide future research. Specifically, the article
addresses the question of width (which and how many) and depth (degree of engagement) of the
stakeholders in the BoP that the firm should engage for co-creation of new products, services, and
business models. She argues that the width and depth of engagement will depend on the objectives
Hart et al. 407

of the firm—whether they are primarily focused on legitimation of the firm’s activities in the BoP
market, generating efficiency based advantages for the firm, or more genuinely focused on mutual
value (social and environmental outcomes) and empowerment of the poor.
The article of Viswanathan and Venugopal elaborates on how firms can begin the process of
co-creation by tapping into deep knowledge in BoP/subsistence markets. The approach they
describe is bottom-up, beginning with micro-level details of life circumstances. Their work speaks
to a number of issues such as organizing a short research immersion for effectiveness and effi-
ciency, and covering different units of analysis in terms of individuals, households, communities,
village-level leadership, and the outside ecosystem of organizations using a bottom-up approach.

Content: Strategy, Structure, and Business Model

As noted earlier, the motivation and predisposition to pursue the BoP as a business opportunity
appear to be influenced by the nature of the business entity involved. Grassroots innovators, social
entrepreneurs, and even new, start-up BoP ventures are essentially “born BoP” so their strategic
focus is unquestioned. Existing corporations are a different story; they face the challenge of orga-
nizing to effectively undertake BoP venturing. Where should BoP ventures be placed in existing
companies? What kinds of business models are the most effective? What type of organizational
structure is most conducive? How do existing company’s reward and incentive systems impact the
prospect for success? What is the impact of the corporation’s current strategy?

International Strategy.  All existing companies aiming to launch BoP ventures face the liability of
outsidership—in their quest to effectively serve the BoP. MNCs face an additional layer of com-
plexity when it comes to the BoP. Corporations with operations in multiple countries may follow
an international strategy that can be classified as either global or multinational (Bartlett &
Ghoshal, 1989; Prahalad & Doz, 1987). The former is based on control by a centralized head
office and standardized global brands with limited autonomy and discretion in individual coun-
tries. Procter & Gamble and Coca-Cola are examples of companies with global strategies. These
firms usually find it difficult to adapt to the unique needs of BoP contexts. A multinational or
“locally responsive” strategy, in contrast, is based on a greater degree of local autonomy and
discretion over businesses, product mix, and operating methods in individual countries. Unilever
and BAT plc are examples of companies with multinational strategies. Unilever’s Indian subsid-
iary, Hindustan Unilever, is seen by local consumers as an Indian company, run by Indians, with
products tailored to Indian tastes. Coke, in contrast, markets a single beverage product created
with a proprietary formula everywhere in the world.
Exploration for new information and knowledge has been found to be facilitated by local goal
and supervisory autonomy (McGrath, 2001). It should come as little surprise, therefore, that an
MNC such as Unilever moved much more quickly into the BoP space in India in the 1990s as
compared with P&G, led by its autonomous Hindustan Unilever subsidiary. In fact, the BoP now
represents more than half of Hindustan Unilever’s revenues and profits. A multinational or locally
responsive strategy thus provides managers in local contexts with greater autonomy to search for
and experiment with grassroots innovations and the engagement of stakeholders in BoP domains.
Regardless of the motivations for MNCs and national corporations to enter the BoP, the man-
agers of both types of entrants need autonomy to engage and dialogue with the diversity of stake-
holders at the BoP to explore new ideas and potential innovations. The existing literature in this
area focuses on three main aspects: organization design and structure, systems and incentives,
and business model innovation.

Organizational Design and Structure.  While BoP entrepreneurs are typically nimble and responsive
to market needs, larger businesses (especially foreign MNCs with distant head offices) need an
408 Organization & Environment 29(4)

organizational structure that allows the locus of control for decision making to reach the organi-
zational boundaries at the local level. In this context, decentralized organizational structures
facilitate the exploration of new competitive landscapes (Schoonhoven & Jelinek, 1990).
Under conditions of dynamic complexity and steep learning curves in the BoP, when informa-
tion flows are random and it is not clear where outside knowledge can be best accessed, a central-
ized gatekeeper or scanner, especially for large existing businesses may not provide an effective
link to the environment. Under such circumstances, organizations may benefit by fostering
organic organizational structures (Burns & Stalker, 1961).
However, Christensen (1997) also argues that the search for disruptive technologies will not
be possible for large existing corporations within the existing organization structure, which is
focused on incremental, “sustaining” innovation for current customers. While he insists on com-
plete autonomy for units that seek technologies that will creatively destroy existing products and
businesses, an organization structure that provides a high degree of discretion in decision making
to boundary spanners might also allow managers to actively explore alternative business models
in complex environments such as the BoP (Brown & Eisenhardt, 1997).
For example, Immelt et al. (2009) describe the organizational structure adopted by General
Electric to spur innovative new growth opportunities in underserved markets called “Local
Growth Teams” (LGTs). They describe the keys to the success of these LGTs as including shift-
ing power and autonomy to where the growth is; building new offerings from the ground up;
building the LGTs from the ground up, hiring locally and staffing with the necessary skills; cus-
tomizing objectives, targets, and metrics to encourage innovation and learning; and, having LGTs
report to someone high in the organization to avoid being captured by an existing business unit.
Beyond corporations, it is also important for entrepreneurs to keep in mind the inflexion points
at which the founder’s vision and passion for sustainable business models at the BoP are diluted
and overtaken by growth in its operations, whether in terms of lines of business or geographic
spread. At that stage, these organizational structure/design elements also need to be considered.

Systems and Incentives.  Engagement of fringe stakeholders at the BoP and deep dialogue in an
unfamiliar context is an unpredictable, iterative process where managers gather information
gradually and develop knowledge by making sense of the consequences of earlier actions (Leon-
ard-Barton, 1995). As a consequence, it is difficult to establish clear objectives and define activi-
ties a priori, making BoP innovation a difficult “sell” in an existing corporations’ resource
allocation process.
To overcome the inevitable lack of resource availability that will inhibit the exploration and
the development of new capabilities, managers need discretionary slack in the form of resources
over and above the original budgeted allocation (Nohria & Gulati, 1996). Discretionary slack
facilitates innovative and experimental approaches to developing proactive environmental strate-
gies by firms (Sharma, 2000). Even for local entrepreneurs, it will be wise not to forget that
learning and exploration at the BoP does not stop and business models will continuously evolve
in response to the needs of various stakeholders, changing socioeconomic conditions, and envi-
ronmental impacts.
While local entrepreneurs are able to integrate external and internal knowledge within a small,
focused team, existing corporations entering the BoP require cross-functional integration for
transferring knowledge within hierarchies (Boland & Tenkasi, 1995) and feeding divergent
thinking. Divergent thinking requires that reward systems permit deviation from routine (Foster
& Kaplan, 2001).
It has been argued and shown that in the BOP context, there is need to create a dedicated
“white space” within existing corporations to house nascent BoP businesses, with its own dedi-
cated set of metrics and incentives (Halme et al., 2012; Hart, 2005; London, 2016). Longer time
frames and metrics centered on learning in the early stages appear to be especially important
Hart et al. 409

since BoP businesses tend to take longer to co-create and incubate than line extensions or geo-
graphic expansions of current businesses (London, 2016).

Business Model Innovation. Avoiding “capture” by existing businesses and metrics is critically

important for BoP ventures within corporations, but so is spreading the learnings from the new
businesses across the company and connecting to other core areas of expertise to encourage scal-
ing and further investment. Permanently isolating new BoP business in a separate unit well beyond
the point of incubation appears to discourage rapid scaling or further investment by the firm (Kay-
ser & Budinich, 2015; London, 2016). Indeed, as boundary-spanners bring fresh perspectives via
their intense interactions with fringe stakeholders at the BoP, firms require systems to both “push”
the new knowledge through the various subunits, and create a “pull” (Schulz, 2001) by raising
awareness of issues in the business environment for internal operating managers.
Equally important to the engagement and co-mingling of assets within existing corporations to
the long-term success of BoP ventures is the development of an appropriate partnership ecosystem
during the building of the value proposition (Casado & Hart, 2015; Hietapuro & Halme, 2015).
For entrepreneurs and corporations alike, it is seldom possible to build effective BoP businesses in
isolation. BoP start-up teams, whether new ventures or corporate internal ventures, usually lack
the full range of skills and experiences necessary to properly embed and co-create a viable value
proposition. External partnerships are key in this regard, be they with NGOs, universities, or other
commercial partners with key connections and insights on the ground (London, 2016).
In summary, under conditions of dynamic complexity in the BoP, institutional environments
and stakeholder terrains are unfamiliar, and appropriate strategies, structures, and business
models for these future competitive landscapes are either unknown or uncertain at best (Brown
& Eisenhardt, 1995). The literature provides a range of insights and prescriptions regarding how
best to enhance innovation performance in new contexts but provides little in the way of sys-
tematic study.
Two of the articles in this special issue shed considerable light on these challenges. Reficco
and Poveda’s article elaborates on the internal barriers in existing businesses that inhibit success-
ful implementation of BoP initiatives in the Latin American context. The article examines 12
large corporations that have received incentives to implement BoP ventures, yet only 3 survived
to implementation. Their analysis shows that the challenge of implementing a BoP venture within
the umbrella of a large corporation can be framed as a challenge to achieve organizational ambi-
dexterity. Two issues stand out as critical: the extent to which synergies can (or cannot) be created
between established and emergent businesses, and the extent to which (in)compatibility between
structures, processes, and incentives will isolate and ultimately eject the new venture out of the
organization. Where synergies are not evident, they argue for an autonomous organization struc-
ture or unit for overcoming the inertia of the incumbent organization.
Angeli and Jaiswal’s article, based on an analysis of six health care cases for serving the BoP,
suggests a four-dimensional framework for business model development. A process of value dis-
covery, leading BoP patients and communities to recognize a health need and seek for an accept-
able treatment, precedes the identification of a successful value proposition. Value creation and
value appropriation then follow to warrant patient affordability and organizational sustainability.

Outcome: Impact Assessment and Metrics

The collective wisdom about the possibilities and limits of inclusive business to alleviate poverty
and deliver sustainable development in BoP contexts has considerably increased over the past
decade. Research shows that inclusive business models can bring affordable products to the poor
and increase choice (Fisher, 2006; Lindeman, 2014; Rangan, Chu, & Petkoski, 2011), but there
are also limitations in how much these concepts can add to the capabilities of the poor (Karnani,
410 Organization & Environment 29(4)

2007; Salazar, Husted, & Biehl, 2012) particularly in the context of weak governance and dys-
functional institutions (Khavul & Bruton, 2013).
New tools and methodologies have emerged to systematically measure and track the impacts
of BoP ventures. The Global Impact Investing Network has produced a widely known system of
metrics and measures for inclusive businesses (Simon & Barmeier, 2010). Additionally, London’s
(2009) impact assessment tool for BoP ventures, building on the capabilities perspective of
Amartya Sen (1999), can be used both to guide strategy development as well as assess the impacts
of ongoing BoP business operation.
Beyond socioeconomic sustainability, however, few studies address the links to, and conse-
quences of, business’s poverty alleviation endeavors for the natural environment (Arnold &
Williams, 2012). Some advances have been made with the advent of frugal innovation, a new
entrant among the streams of research addressing poverty alleviation through business and entre-
preneurship. While the idea of frugal innovation covers much of the same ground as the BoP
approach in terms of serving poor and marginalized populations, it focuses more strongly on
resource scarcity as the source and context of innovation (Cunha et al., 2014; Radjou et al., 2012;
Rosca, Arnold, & Bendul, 2016), thus implying advances in energy and material efficiencies.
While comprehensive impacts and the system-level effects of frugal innovations remain
unclear, assessment models for both the environmental and social sustainability impacts of frugal
innovations (Levänen et al., 2015; Rosca et al., 2016) suggest that while such innovations have
positive impacts on all three sustainability dimensions, there are still potential ecological short-
comings such as creation of additional waste (Levänen et al., 2015) or increased consumption
(Rosca et al., 2016).
There is need to more effectively integrate the natural environment into BoP business models
and strategies. Duke’s article in this special issue sheds light on why environmental concerns
may become subsidiary even in BoP ventures that originally set out to tackle an environmental
problem. Duke’s longitudinal ethnographic study of U.S.-initiated ventures in Kenya and Latin
America exemplify how socioeconomic aims can paradoxically override environmental con-
cerns when firms become embedded in the societal context of the BoP. As managers of foreign
firms become locally embedded, the socioeconomic pressures which are more prevalent and
immediate for the local poor rise in importance. Ecological benefits are often more at the macro
level while social benefits affect people and micro-entrepreneurs directly. That is the reason why
social aspects tend to be directly observable to partners, while environmental ones are not. Social
benefits are immediate in time while environmental ones take longer to be realized. Social ben-
efits accrue mostly to individuals while environmental impacts are more at the system level.
Duke’s findings point to the importance of co-creating and designing value propositions that
include ecological aspects in ways that are locally relevant and do not compromise or diminish
the economic and social benefits for people living in poverty, lest the latter two inevitably over-
ride ecological considerations. Taken together the works of Duke (in this special issue), Rosca
et al. (2016) and Levänen et al. (2015) point to the need for system-level understanding and
integrating such understanding in business model development, a key challenge to future research
and practice.

Reflections on the State of the Field

The BoP literature is well into its second decade, and despite hundreds of inclusive ventures and
scores of small corporate initiatives, few BoP businesses have truly scaled, nor have we seen large-
scale changes in practitioners’ orientation. Why has not the growing body of published work on
BoP and inclusive business produced broader scale impact and adoption? Is there something miss-
ing from the research literature that could make a more robust impact, both in theory and practice?
In our view, there are several reasons for this seemingly slow rate of adoption and diffusion.
Hart et al. 411

First, the bulk of BoP research is conducted by Western researchers who apply and seek to
contribute to theories that were originally framed in developed economies. These theories may
not transfer well to developing economies and may not be appropriate for explaining phenomena
in the BoP context. The knowledge produced thus far may therefore be somewhat skewed, imply-
ing its use value for academic or practical purposes may not be high as it needs to be.
Second, in an effort to build the case for business solutions to poverty, the early academic
writings unwittingly presented the BoP as a large, untapped market waiting to be exploited (as
outlined earlier in this article). However, as we have seen, BoP business did not represent an easy
jackpot for firms; instead, it turned out to be a difficult endeavor calling for endurance, imagina-
tion, patient capital, and a willingness to build new skills and capabilities. The palpable excite-
ment shared by many firms inspired by the idea of quick fortune-making was misplaced, leading
to disappointment and, in some cases, loss of the internal support to continue. As this special
issue makes clear, we are only now beginning to understand and explain what it takes to success-
fully conceptualize, launch, and scale successful BoP enterprises.
This leads to the third and final explanation: To a very large extent, BoP and inclusive business
research remains a macro- and meso-level domain that focuses on the value of interaction
between business, civil society, and the public sector, as well as the business models, capabilities,
and mind-sets such interaction requires at the firm level. Few BoP business studies have adopted
analytical units below the level of whole organizations/ventures and provide thick, empirically
grounded knowledge about inclusive business development at the BoP (for exceptions, see Duke,
2011; Halme et al., 2012; London, 2005; Olsen & Boxembaum, 2009; Reficco & Gutiérrez, in
this issue).
As we have noted in this special issue, BoP contexts are unfamiliar to most Western research-
ers, even to those who are well-traveled in countries with large underserved populations, because
there is a tendency to remain outside of BoP contexts. This unfamiliarity entails demanding
sense-making work, which further adds to the time burden of BoP research.
Indeed, while it is slowly accumulating, such “micro” work requires researchers to spend time
in challenging contexts, often exposing themselves to illness, threatening situations, and emo-
tional stress. Unfortunately, career pressures and tenure cycles often mitigate against young
scholars pursuing more qualitative and ethnographic work, making the pursuit of empirical
research using secondary data at the firm level the self-fulfilling prophecy it has become. We can
only hope that this special issue, along with the growing urgency of the social and environmental
challenges we face will inspire the next generation of management scholars to dedicate them-
selves to this important pursuit.

Priorities for the Future

When launching this special issue, one of our aspirations was to broaden the frontiers of business
and poverty alleviation scholarship to include more insights about the implications for the natural
environment. As all three of the guest editors are primarily business strategy and environment
scholars, the disconnection of business and poverty studies from environmental sustainability
research has worried us deeply and motivated our own research in this area (e.g., Hart, 1997,
2005; Kandachar & Halme, 2008; Sharma, 2014).
In recognition of this disconnect, for example, Hart (2005, 2011) developed the idea of “green
leap” innovation as one approach for reconciliation between poverty alleviation and environmen-
tal sustainability. The concept of Green Leap connects BoP business to clean and regenerative
technology commercialization, building from the logic of disruptive innovation (Hart &
Christensen, 2002). Unfortunately, there is still a tendency to discount environmental concerns
when it comes to BoP and inclusive business, perhaps harkening back to old assumptions from
the development aid era when these two problems were viewed largely as independent (e.g.,
412 Organization & Environment 29(4)

Sachs, 2015). The time has come to dispel this myth once and for all, and BoP business holds the
potential to be the motive force.
The reality, of course, is that poor communities experience the most severe consequences of
environmental unsustainability. Indeed, poverty and environment are deeply intertwined in at
least two main ways: The poor are often hardest hit by the floods, droughts, fires, famines, and
other calamities driven by environmental degradation and climate change—witness the inundat-
ing floods in the low-lying areas of Bangladesh, driving growing numbers of poor farmers off the
land. Yet, paradoxically, poverty is often blamed for exploitation and degradation of the natural
environment, as those in abject poverty appropriately prioritize survival over “environmental”
concerns.
The time is ripe for reconciling business-based poverty solutions with the threats that growth
poses to the natural environment. Duke’s article in this special issue illustrates some of the com-
plexities of developing truly “triple bottom line” business solutions when it comes to the BoP.
Much more research is needed to address questions such as, how can environmental concerns be
translated most effectively into terms that are meaningful for underserved, local people who may
not share the same perspectives about global environmental problems as those in the developed
world? Can methods of co-creation be adapted to ensure that they do not lose sight of the envi-
ronment when it comes to building BoP business models? What sources of technology are likely
to prove most effective in enabling embedded business solutions to poverty that also address key
environmental concerns? Are grassroots, indigenous technologies the most appropriate sources
for sustainable innovation (e.g., Gupta et al., 2003; Polak & Warwick, 2013)? Can “shelf” tech-
nologies already in existence in corporations and universities be applied in new ways to solve the
social and environmental problems of the BoP (Hart, 2005)? Will the high technologies of tomor-
row become radically affordable due to “exponential” drops in cost, fueling a BoP-driven, clean-
tech boom (Diamandis & Kottler, 2012)?
In the years ahead, the very survival of humankind may depend on harnessing the ingenuity
and capabilities of corporations and entrepreneurs to create and develop new ecologically,
socially, and economically sustainable solutions (Millennium Ecosystem Assessment, 2005).
Confronting the environmental challenges associated with inclusive BoP business development
must therefore be the highest research priority for the coming decade, and beyond.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or
publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

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Author Biographies
Stuart Hart is the Steven Grossman Endowed Chair in Sustainable Business and Co-Director of the
Sustainable Entrepreneurship MBA (SEMBA) Program at the University of Vermont’s Grossman School
of Business. He is also S.C. Johnson Chair Emeritus at Cornell’s Johnson School of Management.
Sanjay Sharma is the Dean and Professor of Management at the Grossman School of Business, University
of Vermont. His research focuses on capability development, stakeholder engagement, and organizational
change to generate sustainable innovations and strategy.
Minna Halme is Professor of Sustainability Management at Aalto University School of Business. Her
research focuses on sustainable innovations, co-creating inclusive business models in low-income contexts,
and collaborative sustainability innovation with stakeholders.