When social value becomes survival: capability restoration in hybrid MSMEs under institutional voids

Purpose This study aims to examine how hybrid micro, small and medium enterprises (MSMEs) operating in fragile economies restore individuals’ socioeconomic participation when formal institutions collapse. It introduces capability restoration as an organizational process linking innovation and employment within contexts of institutional voids. Design/methodology/approach Drawing on 18 semistructured interviews with founders and managers of hybrid MSMEs (13 legally registered MSMEs and 5 registered social enterprises) operating during Lebanon’s 2019–2023 crisis, data were analyzed inductively following the Gioia methodology, building a data structure from first-order informant codes to second-order themes and aggregate theoretical dimensions. Findings Four dimensions emerged: innovation as a necessity-driven, relationally embedded capability-enabling mechanism; employment as a multilevel capability-enhancing mechanism; the interdependence of these mechanisms as the operative engine of socioeconomic recovery; and contextual tensions in which organizational survival and social mission are co-constitutive rather than competing imperatives. Originality/value This study’s central contribution is to invert the Creating Shared Value logic, showing that social value creation is a precondition for survival – rather than a source of competitive advantage – once formal institutions collapse. This is reinforced by two secondary contributions: positioning capability restoration as a midrange process theory distinct from resilience, bricolage and institutional work, and challenging the standard hybrid-tension framing to show that survival and mission are co-constitutive under institutional collapse.