2.7.1
Overview
Maas and Liket (2010) argued that value creation is one of the critical motivational factors for focal firms in forming SPs. As CSR practice shifts from traditional philanthropy towards a strategically focused SP, mutual benefits can become attainable for both the focal firm and NPO, as suggested by the nature of a collaborative partnership relationship (Cho & Kelly, 2014; Austin & Seitanidi, 2012a).
The actual value created is often justified by the way a focal firm incorporates a SP in practice. More recently, Austin and Seitanidi (2012) explored the extent of SP practice as a value creation process. Accordingly, they categorised the SP value creation process into four categories, which are association value, transferred resource value, interaction value, and synergistic value (Austin & Seitanidi, 2012). These four
categories of value illustrated Austin’s (2000) earlier argument about the focal firm’s involvement and the value creation concept from philanthropic to strategic. This value creation concept is a valuable conceptual groundwork for refining the research objective in this particular study (Cho & Kelly, 2014; Austin, 2000).
Austin (2000) argued that conducting SPs can bring varied benefits to the focal firm, at different levels. These include enhancing the reputation and image of the focal firm; improving employee morale, as well as recruiting, retention, and skill development; a richer focus on corporate values and culture; increased consumers; greater
22 appreciation from investors; and improved technology testing and development. Later, Austin and Seitanidi (2012) further argued that SP conduct is a value-creation opportunity, and the value created varied depending on the different levels of engagement and commitment.
As discussed earlier, the fundamentals of CSR practice are often established on the basis of three different levels of motivational factors, which include generic resource transfer, core competencies exchange, and joint value creation (Austin, 2000). Generic resource transfer incorporates basic philanthropic collaborations, which involve basic exchanges of economic value and good deeds between non-profits and businesses. Secondly, core competencies exchange occurs when a participant’s unique capabilities are used to benefit the counter-party in the partnership. At this level, an
individual party’s special resources could be explored and utilised extensively to leverage the competencies of the participants. Lastly, the value creation process can further move to an integrated stage where the participants fully collaborate to develop joint products or services. This requires extensive strategic vision and practical approaches to enable participants that are proactively seeking opportunities to transfer the unique dynamic into a brand new, yet distinctive, form.
SPs, argued as a CSR instrument at a strategic level, and the value creation debate have been discussed from the perspective of creating value for the focal firm (Cho & Kelly, 2014). In Austin and Seitanidi (2012b), this argument was established around the way practitioners assessed the return from their input into the SP. The value perceived through, and after, the conduct of a SP has been argued to be tied to engagement and commitment: greater engagement and commitment leads to a higher perception of value by the focal firm. Austin and Seitanidi classified value perception into four categories based on the levels of engagement and commitment within a collobrative partnerships, which are discussed in the next section.
2.7.2
Association value
According to Austin and Seitanidi’s (2012a) argument, association value is the value
created by a focal firm through associating themselves with any kind of philanthropic activity. This is considered to be the bottom level of the value creation hierarchy, due to being the least engaging way to conduct SPs, with minimal value creation (Foster,
23 Meinhard, Berger, & Krpan, 2009). Value is largely created through increased legitimacy and associated support from relevant stakeholders (Austin & Seitanidi, 2012a).
This level of value creation has limited engagement between organisations, and the partnership operation often relies on an exchange of financial resources with a desired corporate image, rather than actual involvement. Association value is often criticised
as a “window-dressing” attempt, due to its lack of depth and engagement; activities have little direct impact on social/environmental issues (Kolka & van Tulder, 2002). Further, there is a risk the focal firm will fail to explore and identify value within the partnership, and eventually become less motivated and engaged over time due to dissatisfaction.
2.7.3
Transferred value
The transferred value includes values created via the exchange of resources between a focal firm and NPO during the conduct of a SP, specifically, market intelligence and development (Koka & Prescott, 2002). This would directly enhance the focal firm’s competitiveness, as they learn through collaboration, as well as possible development of second generation customers (Austin & Seitanidi, 2012b; Porter, 1998; Bryson, Crosby, & Middleton Stone, 2006).
Creating such value requires engagement and interaction with the organisation beyond
“give and take” practice (Koka & Prescott, 2002). In particular, the key to facilitating this value creation opportunity is the ability to identify the available internal and accessible resources from the partner (Hunt & Morgan, 1995; Hudson, 1999).
2.7.4
Interaction value
Interaction value considers all the value created during the conduct of a SP as the focal firm and NPO interact with each other at an organisational level. Value created includes knowledge, experience, information, and networks. In addition, the interaction value also considers enhanced government and community relationships,
24 plus convenience in terms of granting an operation licence, and also includes risk management (Austin & Seitanidi, 2012).
At this level, the value creation process goes beyond sharing and utilising pre-existing resources. Any forms of interaction between the organisations within a partnership are considered as contributing to the interaction value. However, such value usually accumulates over time, and might require special attention to notice. Regardless, the organisation can benefit from gaining interaction value to extend their internal capabilities beyond the existing partnership.
2.7.5
Synergistic value
Synergistic value considers all other possible values generated during the course of SP practice, besides the three previously discussed value categories. As suggested by Austin and Seitanidi (2012a; 2012b), some values are not predictable prior to conducting the SP, but are possibly created through the innovation aspect of business. Improved knowledge and learning experiences would further strengthen the
performance of a business’s risk management skills and productivity (Austin & Seitanidi, 2012a).
In a collaborative partnership context, the involved, unknown factors challenge the organisation to conquer unforeseen difficulties and tasks. Such experience enriches the value gained from operating in a partnership, and it empowers the organisations with greater potential for future operation.
2.8
Summary
CSR practice has come a long way since it first emerged in Western business practice. As business conduct increases in developing countries around the world, it is critical to understand CSR practice in a context with totally different cultural norms and institutional environment settings. The growing number of SPs in the Western world has led Eastern practitioners to start to appreciate the benefits of conducting such mutually beneficial partnerships. Literature has argued the importance of understanding the extent of SP conduct from the perspective of co-created value.
25 Being mutually beneficial is a distinctive feature of SPs among other CSR instruments, if conducted at the strategic level. Figure 2 summarises the relationship between CSR and SPs, based on the literature. Due to differences in the environmental context and the shallow history of CSR practice in countries such as China, it is important to discuss the impact of the political context and business philosophy. This will be covered in the next chapter.
26 Figure 2 Summary of Literature
27
3
Chapter Three: CSR and NPO in China
3.1
Overview
The first section of this chapter discusses the origin and history of CSR in China, including the practice of SPs. The second part of this chapter discusses NPOs in China by examining the developing background and unique characteristics of Chinese NPOs. This chapter draws on cultural aspects of Confucianism and modern globalised business practice to discuss the validity of CSR practice and the reality of NPO operation in China. The evidence from the literature indicates that CSR/SP practice is a relevant term in current Chinese business practice, while NPOs are rapidly growing, assisted by the improving social/political environment in China. With emerging SP practices spreading across the country, it is critical to explore influential factors on the performance of a SP from the CSR and NPO aspects.