Social business theory: a seven-principle framework for sustainable social value

Abstract

This study develop a mechanism-based framework for understanding Social Business Theory (SBT) in hybrid organizations. Drawing on Muhammad Yunus’s seven principles of social business, it examines how governance constraints, financial sustainability (FS) and mission primacy interact to generate sustained social impact. The study aims to clarify the mechanisms through which hybrid organizations operationalize social business principles to create measurable social value. This study employs an interpretivist qualitative approach to explore the practical application of SBT and address the research questions. The approach emphasizes feedback loops and contextual dynamics rather than statistical generalization, providing a theory-driven understanding of organizational mechanisms. Yunus’s seven principles are operationalized into three mechanisms – Investor Repayment without Dividend (IRD), Financial Sustainability (FS) and Social Mission Primacy (SMP) – demonstrating how normative principles are translated into actionable organizational practices. The framework is illustrated through propositions linking these mechanisms to long-term social outcomes. The framework shows that hybrid organizations can balance financial and social objectives by applying principle-driven governance and operational strategies. IRD reduces short-term financial pressures, FS ensures organizational stability, and SMP preserves mission alignment, collectively enabling sustained social impact. The study links the original principles to operational mechanisms, offering practical guidance for implementation. This study advances SBT by explicitly connecting normative principles to measurable organizational mechanisms, addressing gaps in prior research that treated social and financial objectives separately. It provides a theoretically grounded and actionable framework for hybrid organizations seeking sustainable social value creation, particularly in emerging economies.