Value creation in business-NGO partnerships for development : multiple case study of company resources deployment.

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MBA Thesis

Value Creation in Business-NGO Partnerships for Development

Multiple case study of company resources deployment

Author: Alina Vinogradova

UvA Student ID: 10298967

Contact details: alina.vv@hotmail.com

Thesis supervisor: Dr. Arno Kourula

Date of submission: 16 September 2013

Confidentiality restrictions: none

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ABSTRACT

Today’s corporations operating in the global market place have a stake in supporting international development. Such companies possess the resources needed for addressing socioeconomic

challenges in developing countries, but often lack the understanding of how to leverage these

resources to benefit local communities. NGO’s, on the other hand, have access to local communities and experience in addressing the social concerns, but lack the resources to achieve significant societal impact on their own. Business-NGO partnerships, if implemented successfully, can create significant value for society and for the partnering organizations.

The first objective of this thesis is to contribute to existing academic literature on value creation in cross-sector partnerships by extending the theory. A conceptual model is proposed, linking four types of collaborative value (associational, transferred resource, interaction and synergistic) to different types of resources (generic and organization-specific) deployed on the company side. The second objective is to provide practical guidance to business managers seeking ways to leverage their resources for the social good and considering involvement in cross-sector partnerships. The thesis contributes to the existing body of empirical research by identifying and analyzing specific value creation pathways within two selected business-NGO partnerships

(FrieslandCampina / Agriterra and Accenture / Plan International). The focus is on the role of various company resources (e.g. money, expertise, knowledge, networks, and human resources) in the value creation process. The findings of the two qualitative case studies support the proposed conceptual model, and provide an in-depth answer to the following research question: How can

companies leverage their resources in cross-sector partnerships for development to create value for all parties involved?

As demonstrated by the outcomes of these partnerships, various types of company resources can be effectively deployed to create economic and social value at the micro, meso and macro levels. However, the highest forms of value, interaction and synergistic, can only arise by leveraging a company’s distinctive assets and competencies, for example, expertise or networks. Finally, this thesis demonstrates how deployment of organization-specific resources enables the business-NGO partnerships to progress to the integrative stage, where innovative and scalable solutions to social problems can be created and implemented, and significant social impact can be achieved.

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I. INTRODUCTION

A. Background of the thesis topic

In today’s globalized economy, where no nation or society functions in isolation, the socioeconomic problems faced by developing countries call for action from various parties (businesses, NGO’s, governments) in developed countries. The local communities face a long list of challenges: economic development, education, employment, health care, gender equality, poverty alleviation, community capacity building, and environmental sustainability. Most of these challenges are on the United Nations’ priority agenda in the form of Millennium Development Goals, including the imperative to establish a global partnership for development, because the scope and complexity of these problems often require cross-border and cross-sector collaboration (Kolk, 2013). Not surprisingly, international partnerships between businesses and nonprofits are becoming increasingly common and achnowledged as a powerful vehicle for sustainable development worldwide (Austin 2000b; Margolis & Walsh, 2003; Porter & Kramer, 2011; Selsky & Parker, 2005; Austin & Seitanidi, 2012).

The motives for multinational enterprises to try to aid local communities in developing countries vary: from purely philanthropic, to addressing the increasing demand for accountability by various stakeholders, to developing new markets for distribution (C&E 2011; C&E 2012; Kolk, 2012). And the ways of addressing socioeconomic issues can also differ, as one can see from multiple real life examples covered in the media. While some companies choose to contribute to international development in the form of cause-related sponsorships and donations, others go beyond charity by getting involved in development projects where their core competencies can be applied. There is no conclusive evidence that one approach is universally more efficient than the other, as it all depends on the context. However, a number of recent academic publications have promoted the opinion that Western companies’ unique resources such as knowledge, expertise and technology, can create much greater social and economic value in developing markets than money donations ever could (Austin, 2000; Porter and Kramer, 2006; Austin and Seitanidi, 2012).

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Modern enterprises ambitious enough to put international development projects on their CSR agendas often have whole portfolios of partnerships with nonprofits. However, although possessing the right resources, companies often lack direct access to local communities, or proper understanding of how these resources can be leveraged best to address local social needs. In such cases, partnering with locally embedded nonprofits (Crane and Matten, 2007; Heath, 1997; Pearce and Doh, 2005; Salamon and Anheier, 1997) can add value. If successfully implemented, such partnerships can be beneficial for all parties involved, by aiding nonprofits in achieving their missions (Austin and Seitanidi, 2012), ensuring future economic gains for businesses, and helping individuals and communities in developing countries to improve their standard of living.

B. Thesis objective and research question

The starting premise of this thesis is that the business sector has both the self-interest and the appropriate means to support international development. Multinational enterprises operating in the global marketplace have a stake in finding solutions to socioeconomic problems in

developing countries, as this can create new consumer markets, supply chain improvements and reputational gains. Moreover, such companies possess the much sought after financial

resources needed for the implementation of international development projects, as well as organization-specific resources, such as expertise, technology, and networks, which can be valuable for the local communities, and for the NGO’s facilitating local development projects. This constitutes an interesting research topic: the ways in which these different company assets can be used to benefit local communities and create social value, while also creating economic value for the companies themselves and their NGO partners.

Existing literature on cross-sector collaboration sheds light on different types and sources of value and explores various enabling and moderating factors for value co-creation. It also addresses resource complementarity in general as a common rationale behind the partnerships. However there has been no attempt to attribute different types of value to specific types of resources deployed on the company side. Moreover, there is a need for additional empirical research documenting specific value creation pathways (Austin & Seitanidi, 2012). This thesis

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aims to address this research gap, and by means of multiple case study to illustrate and analyze how exactly company resources can contribute to co-creation of value.

In order to examine the role of company resources in the value creation process, the following research question has been formulated:

How can companies leverage their resources in cross-sector partnerships for development to create value for all parties involved?

The objectives of this thesis are, first, to contribute to existing academic literature on value creation in cross-sector partnerships by extending existing theory, and second, to provide practical guidance to company managers considering involvement in socially oriented partnerships with NGO’s or looking to improve existing partnerships. Austin and Seitanidi’s Collaborative Value Creation (CVC) analytical framework will be used to explore various sources and types of value created in selected cross-sector partnerships for development. The theory shall be extended by establishing the link between the specific resources contributed on the company side to different types of created value. The explanatory nature of the case studies shall provide insights into effective and meaningful deployment of assets, and should therefore have managerial relevance.

C. Scope and definitions

Of the multiple types of cross-sector collaboration the focus of this thesis will be on integrative (Austin, 2000) business-nonprofit partnerships formed explicitly to address socioeconomic issues in developing countries (further in the text: partnerships for development). Integrative partnerships can be defined as long term, open-ended and largely common interest oriented projects engaging partners on an on-going basis (Selsky and Parker, 2005). The terms nonprofit and NGO will be used interchangeably to refer to organizations that are formal, private, self-governing, voluntary in membership and participation, serving a public purpose and non-profit-distributing (Salamon & Anheier, 1992a). To add further clarity, following are several more definitions of terms and concepts frequently used in this study.

Company resources shall refer to all tangible and intangible assets owned or controlled by the

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organizational processes, firm attributes, information and knowledge (Barney, 1991). The focus of the study will be on a few selected types of resources, namely: cash, knowledge, expertise,

technological know-how’s, managerial practices, reputation, networks and human resources.

The analysis will employ Austin and Seitanidi’s distinction between generic resources, such as cash, and organization specific resources, such as expertise or networks. Human resources can belong to both categories, depending on how they are deployed: whether company employees are utilizing their professional skills within the partnership or just volunteering their time to activities for which no special skills are required.

Value created by a partnership, or collaborative value, can be defined as “the transitory and enduring benefits relative to the costs that are generated due to the interaction of the

collaborators and that accrue to organizations, individuals and society” (Austin & Seitanidi, 2012, p. 728). The concept of shared value refers to policies and practices that enhance the company’s competitiveness while simultaneously advancing the economic and social conditions in the communities where it operates (Porter & Kramer, 2011).

For corporate social responsibility (or CSR) the European Commission’s (2001) definition will be used: “A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” By

stakeholders, as suggested by Freeman (1984) one should understand any group or individual

who can affect, or is affected by, the organization reaching its objective.

D. Structure of the thesis

The introduction will be followed by a detailed literature review (Chapter II) covering existing theories and frameworks relevant to the subject of this study. Next will follow a proposed

extension to the Collaborative Value Creation (CVC) framework based on a synthesis of existing theories. Chapter III will explain the methodology used to carry out the empirical research and analyze the collected data. Chapter IV will present and discuss the findings of two in-depth case studies of cross-sector partnerships: FrieslandCampina / Agriterra, and Accenture / Plan

International, and conclude with cross-case analysis through the lens of the proposed theoretical model. Chapter V will summarize the findings and outline managerial implications for both the

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business and nonprofit sectors. Finally, research limitations will be discussed and avenues for further research will be suggested.

II. LITERATURE REVIEW

A. Main related themes in literature

Proclaimed by Austin (2000) as the collaborative paradigm of the 21st century, cross-sector partnerships have received significant attention in management, business and society and international business literature. Branzei and Le Ber’s (2013) overview of cross-sector

partnership research to date identifies four main themes: the boundaries that such partnerships overcome (O’Reagan and Oster, 2000; Rondinelli & London, 2003); the trade-offs and

paradoxes these partnerships reveal and hide (Hayes et al., 2011); the value that is being created (Le Ber & Branzei, 2010b) and when and why failures to create value occur (Seitanidi, 2008); and the change that cross-sector partnerships can bring to the world (Selsky & Parker, 2005). Various academics have contributed to shedding light on the nature, evolution and

conceptualization of cross-sector partnerships, covering such aspects as collaboration types, functions, reasons for engagement, success factors, context and outcomes. While all of these aspects have some degree of relevance to this study, the literature review will focus mainly on the topics directly related to value creation (strategic CSR, CSV concept, CVC framework, and effectiveness evaluation), the rationale for partnering (resource dependency theory), the

partnership success factors (organizational fit).

B. Strategic CSR and shared value

Friedman’s (1962, 1970) once widely accepted view, stating that the only responsibility of business is to make profit, seems to be losing its popularity among academics and in modern society in general. The stakeholder theory is currently on the rise, advocating the view that a company’s legitimacy and survival depends not only on meeting the expectation of shareholders, but also on dealing with the different and often opposing interests of a broad range of

stakeholders including customers, employees, suppliers, competitors, regulators, nonprofits, media and local communities (Freeman, 1984; Green & Peloza, 2011; Jensen, 2002; Neville &

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Menguc, 2006). Thus the argument of incompatibility between social and business value does not seem to withstand the mounting evidence from recent academic research proving the opposite, and company managers are starting to see CSR as a business opportunity or even a business necessity. Society’s growing pressures and expectations (Aguilera, Rupp, Williams & Ganapathi, 2007; Campbell, 2007; Marquis, Glynn & Davis, 2007), as well as newly discovered linked interests, encourage the private sector to assume wider responsibilities in curing social ills and to set a new standard for performance evaluation which incorporates both financial and moral dimensions (Paine, 2003). All of this sets the stage for a completely new role for corporate social responsibility within the business agenda.

The concept of CSV (creating shared value) introduced by Porter and Cramer (2006) is based on the premise of mutual dependence between the competitiveness of a company and the health of the communities around it. The authors make a distinction between responsive CSR, when the company is trying to be a good corporate citizen and address social concerns of stakeholders by mitigating the harm from their existing operations, and strategic CSR, when the company tries to identify the societal issues where it can make a real difference while also gaining a competitive advantage. Such a strategic approach to corporate social responsibility can become a “source of tremendous social progress, as the business applies its considerable resources, expertise, insights and management talent to activities that benefit society” (Porter & Kramer, 2006, p.80), and the closer the social issue at stake is tied to a company’s core business, the greater is the opportunity to leverage the firm’s resources to create social value. Companies are neither responsible for, nor able to solve all socioeconomic problems of the modern world. They should therefore select the issues which they are best equipped to resolve, and choose resolutions which will reinforce corporate strategy by bringing them competitive gain. In other words, companies should look for opportunities to create shared value, because this “leads to self-sustaining solutions that do not depend on private or government subsidies” (Porter & Kramer, 2006, p. 92).

According to the Barometer study (2012), 87% of NGO’s and 93% of businesses engaged in cross-sector collaboration are aware of and/or are exploring the opportunities of CSV, yet it’s rarely named as the ultimate rationale behind a partnership. Enhancing brand reputation and achieving greater credibility (with a score of 82%) remains the main driver for companies to

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engage with NGO’s, while for NGO’s (with a score of 96%) the main driver remains the opportunity to access and generate resources (including funding).

C. Collaborative Value Creation framework

As the search for new resources and more effective organizational approaches brings NGO’s and businesses together (Austin, 2000), the once adversarial relationship between the two sectors is undergoing a shift towards more dialogue and cooperation (Kourula and Laasonen, 2010). Creation of new public value (Sagawa, 2001) becomes possible in cross-sector

partnerships by overcoming known barriers (Rondinelli & London, 2003) and individual limitations (Austin, 2000a; Kolk et al., 2008; Warner & Sullivan, 2008), developing new capacities (Crosby & Bryson, 2010) and experimenting with novel ideas (Barrett et al., 2000). The Collaborative Value Creation (CVC) framework proposed by Austin and Seitanidi (2012) provides a powerful conceptual and analytical tool, which enables a deeper understanding of multiple dimensions and levels of value creation in business-nonprofit collaboration. CVC distinguishes between different types of value and indicates where to look for them. As it will be the main theoretical framework employed for the analysis and evaluation of the empirical research outcomes, and will also serve as a basis for the proposed theory extension, it deserves greater elaboration.

The first component of the CVC framework is the value creation spectrum, which defines four

potential sources of value (resource complementarity, resource nature, resource directionality,

and linked interests) and four types of collaborative value (associational, transferred resource, interactional, and synergistic). The main hypothesis is that greater value is created on all levels by a collaboration’s move from sole creation towards co-creation (Austin & Seitanidi, 2012). The view of resource complementarity as a source of value creation is grounded in resource dependency theory (RDT), which explains an organization’s behavior in terms of its

dependence on external resources possessed by other organizations (Pfeffer & Salancik, 1978). The starting premise of RDT is the firm’s entire survival depends on its ability to acquire resources, and therefore resources should be seen as the ultimate basis of power (Pfeffer & Salancik, 1978). Firms make use of networks of external relationships to gain power and access resources (Bae & Gargiulo, 2004), and therefore various forms of inter-organizational

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arrangements, such as partnerships and alliances, should be seen as a means of organizational response to resource dependencies (Hillman et al, 2009; Drees & Heugens, 2013). The RDT framework holds potential for predicting inter-organizational arrangement formation and its outcomes, and it can also be applied to nonprofits, because similar to commercial firms they engage in resource acquisition and mobilization to sustain their social value creating operations (Gras & Mendoza-Abarca, 2013).

While access to needed resources can arguably be seen as the main rationale for collaboration, it should be noted that organizational fit between the company and NGO is a fundamental determinant in realizing full potential for value creation, resulting from resource

complementarity (Austin & Seitanidi, 2012). “Fit within a partnership refers to the degree the

collaborating organizations can achieve congruence in their respective perceptions, interests and strategic direction” (Austin & Seitanidi, 2012). In order to ensure good fit it is important to have missions, resources, management, work force, target market, product, culture, business cycle, evaluation and cause aligned (Berger et al., 2004; Brammer & Pavelin, 2006).

Organizational compatibility can help to overcome barriers stemming from inherent sector differences (Austin & Seitanidi, 2012). While being the enabler of synergistic value, good fit also produces long-lasting associational value, through the company’s strengthened

relationships with employees, investors and communities, and improved name recognition and increased donor base for nonprofits (Gourville & Rangan, 2004). Organizational fit should be assessed at the formation stage of a business-NGO partnership, to evaluate its potential to evolve into an integrative or transformational relationship (Austin, 2000a).

Viewing resource nature as a source of value (Austin & Seitanidi, 2012) can be linked to another theory focused on the importance of resources – resource based view (RBV), explaining the firm’s competitive advantage in terms of its possession of unique resources, which are rare, valuable, inimitable, non-substitutable and firm-specific (Wernerfelt, 1984; Barney, 1986; Barney, 1991; Peteraf, 1993; Barney & Peteraf, 2003). Along a similar line of thinking, the ‘core competency’ term was coined by Prahaland and Hamel (1990), referring to a fundamental knowledge ability, expertise or technological capacity in specific area. Austin and Seitanidi (2012) suggest a distinction between generic resources, that any company would possess (cash, for example) and organization specific resources which are unique to each

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organization and often intangible, such as knowledge, capabilities, technology, networks and infrastructure, and hypothesize that mobilization of distinctive competencies has larger value creation potential, which is also in line with CSV theory. Resource directionality and use can be unilateral (going one way only) or reciprocal (allowing for exchange and intermingling). Conjoined integration of resources facilitates new services and activities, that neither

organization could have created alone (Austin & Seitanidi, 2012). Linked interests have a great influence in shaping behavior, so the more that organizations perceive their self-interests as linked to the partnership outcomes, the greater is their incentive to engage in efficient collaboration (Austin & Seitanidi, 2012). This proposition is also in line with CSV theory suggesting that opportunities for shared value creation are greater when a company’s strategy (and therefore its interests) and its CSR agenda are aligned.

Four different types of value can be derived from the above-mentioned value sources.

Associational value (e.g. credibility, legitimacy, reputational gains, consumer preference and

loyalty) is accrued by partners just by virtue of the collaboration (Austin and Seitanidi, 2012). It can play an important role in company evaluation by investors, who no longer look solely at financial performance, but also at stakeholder management, community contribution and reputational risk (Heap, 2000). Transferred resource value occurs upon the receipt of the resource by one party from another. Depreciable resources like cash are used up quickly, while durable resources such as new skills acquired can create a value renewal cycle. Interaction

value (e.g. trust, relation capital, learning, joint problem solving, coordination, transparency,

accountability, conflict resolution) results from the actual process of working together. Organizational learning has in fact been identified by Selsky and Parker (2005) as one of the most important outcomes of cross-sector partnerships. Synergistic value is driven by

innovation, when combined resources create opportunity for completely new forms of change, and new solutions to old problems, “holding the potential for significant organizational and systemic transformation and advancement at the micro, meso and macro levels” (Austin & Seitanidi, 2012, p. 731).

Several academics offer a view of the business-nonprofit relationship as a dynamic continuum, where companies can move from one stage to another depending on the type and intensity of the interaction. Rondinelli and London (2003) see it as a progression from low-intensity

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length’ to moderate-intensity ‘interactive collaboration’ to high-intensity ‘management alliances’. Bryson et al. (2006) position on one side organizations who barely relate to each other on a social problem, and on the other side, organizations who practically merge their capabilities to solve a social problem. The second component of Austin and Seitanidi’s CVC framework offers another definition of collaboration stages. It builds on Austin’s (2000a, 2000b) conceptualization of a collaboration continuum consisting of three relationship stages:

philanthropic (donor-recipient scheme), transactional (e.g. reciprocal exchange of resources

through specific activities, sponsorships, cause-related marketing) and integrative (missions, strategies, values and activities are aligned towards co-creation of value). A fourth stage,

transformational, added to the framework in Austin and Seitanidi’s (2012) article represents an

emerging trend to go yet beyond the integrative stage, towards co-creation of transformative change at the societal level. Figure 1 illustrates how the nature of the relationship and value change as the partnership progresses from one stage to the other along the continuum line. Stage I Stage II Stage III Stage IV NATURE OF RELATIONSHIP Philanthropic>Transactional>Integrative>Transformational • Level of Engagement Low <---High • Importance to Mission Peripheral <---Central • Magnitude of Resources Small <---Big • Type of resources Money <---Core Competencies • Scope of Activities Narrow <---Broad • Interaction Level Infrequent <---Intensive • Trust Modest <---Deep • Internal change Minimal <---Great • Managerial Complexity Simple <---Complex • Strategic Value Minor <---Major • Co-creation of value Sole <---Conjoined • Synergistic value Occasional <---Predominant • Innovation Seldom <---Frequent • External system change Rare <---Common Figure 1. The collaboration continuum (Austin & Seitanidi, 2012).

In the philanthropic stage the transfer of resources creates social value by enabling the NGO to pursue its mission. As characterized by Margolis and Walsh (2003, p. 289) it’s a ‘buy’ option for companies practicing CSR. But since the nature of the resource is generic (cash), the value is no more than what would come from any other donor, so opportunities for synergies and

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creation of new solutions are missed, while the NGO is merely doing more of the same it was doing before on its own.

Highly developed employee volunteer programs, CRM, event sponsorship, logo licensing agreements and other specific projects with clearly defined objectives are inherent to the

transactional stage of collaboration. Such explicit exchange of resources and reciprocal value

creation (Googins & Rochlin, 2000) are seen by Selsky and Parker (2010) as arising primarily for self-interest and secondarily for social good. During this stage associational value becomes dominant, accruing in the form of community goodwill (Deloitte, 2004), increased employee identification with the organization, and improved employee performance at work (Bartel, 2001; Jones, 2006). Interaction value arises in form of new skills developed (Peterson, 2004; Sagawa & Segal, 2000). Comparatively greater transferred value accrues to the NGO, when volunteers from the business side contribute not only generic time and labor, but more importantly, specialized skills (Kanter, 1999; Vian, Feeley, Macleod, Richards, &McCoy, 2007).

In the integrative stage “collaboration is seen as integral to strategic success of each organization, but beyond this, greater priority is placed on producing societal betterment” (Austin & Seitanidi, 2012, p.742). The value creation process differs based on the nature of the resources and the way they are leveraged. Key assets and core competencies begin to play a big role in value co-creation, and this new bundle of productive resources holds increased potential to create synergistic innovative solutions to old problems. However such intense collaboration requires a great deal of time, effort and commitment on the managerial side of both

organizations, so arriving at this stage requires careful relational processes and reconciling different value creation logics (Le Ber & Branzei, 2010a).

The transformational stage represents collaborative social entrepreneurship that creates value in the form of large-scale, transformational benefit for a significant segment of society or for society at large (Martin & Osberg, 2007).

Figure 2 offers a visualization of the changes in the framework’s key variables along with a partnership’s evolution from sole-creation to co-creation, and its movement across the CVC spectrum.

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Sole-Creation--- Co-Creation SOURCES OF VALUE

Resource Complementarity Low---High Resource Nature Generic---Distinctive Competency Resource Directionality Unilateral--- Conjoined Linked Interests Weak/Narrow---Strong/Broad TYPES OF VALUE

Associational Value Modest--- High Transferred Resource Value Depreciable--- Renewable Interaction Value Minimal--- Maximal Synergistic Value Least--- Most Innovation Seldom--- Frequent STAGES Philanthropic -> Transactional -> Integrative -> Transformational Figure 2. Collaborative value creation spectrum (Austin & Seitanidi, 2012).

The third component of the framework explores value creation during different phases of the partnership process: formation, selection, implementation, design, operations and

institutionalization. In the first phase, formation, organizational compatibility (or “fit”), being

the fundamental determinant of potential arising from resource complementarity, is assessed. To evaluate resource complementarity, the nature of resources is examined: tangible (e.g. money, land, facilities, machinery, supplies, structures, natural resources) and intangible (e.g. knowledge, capabilities, management practices, skills). After the social problem has been articulated, and linked interests, motives and missions of the partners have been identified, begins the next phase, selection, where partnership criteria are developed and risks are

assessed. The remaining phases of implementation, design, operations and institutionalization are dynamic phases of experimentation and interaction through which the partnership structure emerges and takes shape. Rules and regulations are formulated, leadership established,

activities planned and eventually value creation starts at all levels. The partners deepen their knowledge of each other’s organizations and resources, creating the capability for co-creation of innovative products, services and solutions. “This is a manifestation of the iterative and accumulating generation of interaction value that can also progress to synergistic value” (Austin & Seitanidi, 2012, p.940).

The fourth component of the framework focuses on collaboration outcomes, and proposes value assessment on three levels: meso (benefits for organizations), micro (benefits for individuals) and macro (societal welfare). Additionally, two loci are distinguished: within the

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collaboration (value accruing to partnering organizations and their employees) and external to it (benefits for other individuals and organizations, as well as communities and society as a whole). More on the loci of value creation and partnership outcomes per level of analysis can be found in Exhibit I.

D. Partnership effectiveness evaluation

Assessing partnership effectiveness is complicated by the lack of measurable objectives or built-in evaluation mechanisms, and the relationship being a moving target that changes over time (Kolk, 2012). “Complexities also stem from the existence of multiple partnerships as well as other initiatives to address the same purpose, and the fact that some activities, such as awareness, advocacy, capacity-building and empowerment are hard to measure” (Kolk, 2012, p.8). Furthermore the evaluation (as well as implementation) of specific projects or programs is easier than the measurement of large scale systemic or societal change (Austin, 2000b;

Waddock, 1991). Therefore in development literature a distinction has been made between output (immediate results of activity), outcome (benefits, modifications, changes, learning resulting from partnership) and impact (long-lasting effects such as structural and sustainable solutions to societal problems, as well as possible negative side effects) (Liese & Beisheim, 2011; OECD-DAC 2002; Schaferhoff et al, 2009), and most research focuses on assessing output. Results can be evaluated at micro, meso and macro levels, where “trickle effects” from stakeholder interactions should be considered (see Figure 3).

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Figure 3. Trickle effects of partnerships and the various levels (Kolk, 2013).

The Partnerships Effectiveness Model (PEM) developed by the Partnerships Resource Centre (Figure 4) offers a monitoring and evaluation tool for practitioners, following the partnership from its start-up phase through to its output and outcome phases, analyzing four relevant aspects of partnering: context, efficiency, effectiveness and impact

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Figure 4. The Partnerships Effectiveness Model (http://partnershipsresourcecentre.org).

E. Value creating potential of company resources

In this section elements of the different frameworks discussed earlier will be synthesized to propose a new theoretical model (Figure 5), which links different types of deployable company resources to different types of resulting collaborative value. The outcomes of cross-sector partnerships, arising in the form of benefits at the micro, meso and macro levels, both internally and externally (as classified by Austin and Seitanidi) can be categorized into four different types of value: associational, transferred resource, interaction and synergistic (again using Austin and Seitanidi’s classifications). On the company side, resource input is divided into two different groups, as suggested by Austin and Seitanidi’s framework : generic (money, in-kind donations and volunteer time) and organization-specific (knowledge, expertise, technological know-how’s, managerial practices, networks and reputation). In the philanthropic and transactional phases, the company’s resource input is often limited to the generic group. But moving toward the

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co-creation requires deployment of organization-specific resources. Generic resources can be used in activities carried out by the NGO and allow it to expand its current activities, but the resulting value is limited to two types – associational value and transferred resource value. Interaction between the business and NGO is restricted to simple transactions and doesn’t allow the opportunity for interaction value creation which would only arise from closer communication and involvement in mutual projects. Synergistic value, which is driven by the unique

combination of collaborators’ distinctive assets, is also impossible in partnerships where only generic resources are deployed.

On the other hand, leveraging organization-specific resources, whether or not in combination with generic resources, offers opportunities to create all four possible types of collaborative value: associational, transferred resources, interaction and synergistic, and therefore offers greater potential for shared value creation. Organizational fit serves as a moderating factor in both cases: in the first case it affects only associational value, and in the second case – all four types of value. Fit can be assessed on multiple levels: strategic alignment of mission, cause, interests and core competencies, availability of specific resources needed for the project, compatibility between two organizations’ management teams, work force and internal culture. Good fit on all levels positively affects a partnership’s outcome and significantly increases the potential for value creation, especially in the long run.

For further clarification (Figure 5) “activities” refers to specific actions undertaken by

individuals or companies, which can also include simple financial transactions. “Projects”refers to longer-term cooperation with defined objectives and significant involvement on both sides.

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Figure 5. Value creation potential of company resources.

III. RESEARCH METHODOLOGY

A. Research method

A detailed study of existing literature on the subject of cross-sector partnerships helped to identify several concepts and frameworks that could be helpful in understanding value creation and analyzing different aspects of partnerships, namely: Austin and Seitanidi’s Collaborative Value Creation framework, Porter and Kramer’s shared value concept, resource dependency theory, organizational fit concept and the framework for partnership effectiveness analysis. As

Company's input Throughput Output /Outcome / Impact

Gen eric reso u rc es Money In-kind donations Volunteer time

Activities

Associational value

Transferred resource

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O rg an iz ati o n s p ec ific re so u rce s Knowledge Expertise Technological know-how's Managerial practices Networks Reputation

Activities / Projects

Associational value Transferred resource value

Interaction value Synergystic value

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Tran sf o rma ti o n al In te grat ive T ra n sac tio n al P h ilan th ro p ic Moderating factor: Organizational fit

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an extension to existing theory, a conceptual model has been proposed linking various company resources deployed in the partnership to different types of arising collaborative value.

In order to answer the research question “How can companies leverage their resources in

cross-sector partnerships for development to create value for all parties involved?” the author

conducted an empirical study of two business-nonprofit partnerships in the field of international development. Various pathways of value creation within selected partnerships were identified and analyzed using Austin and Seitanidi’s framework, with a specific focus on the role of generic and organization-specific resources in the value creation process. The main objective of the analysis was to find empirical support for the suggested theoretical model concerning the potential of company assets to play a role in the creation of different types of collaborative value.

For the purpose of this research, a qualitative, rather than quantitative approach was chosen as it provides rich data for understanding dynamics and theories in one single setting (Eisenhardt, 1989). A qualitative method of inquiry also allows for more in-depth analysis suitable for explaining social phenomena and human behavior, which are difficult to quantify. Since this thesis aims to evaluate not only economic value, but also social value ranging from short-term benefits for individuals to long-term societal impact, a qualitative approach offers broader opportunities to consider all the intangibles.

Case study has been identified by Yin (2003) as a preferred research strategy for answering ‘why’ and ‘how’ questions, because such questions deal with operational links needing to be traced over time, rather than mere frequencies or incidence. Case studies are especially suitable when the research is done on a contemporary phenomenon within a real-life context and the researcher has little control over events (Yin, 2003). Cross-sector partnerships as a unit of analysis fall perfectly under this definition. An explanatory case study is generally seen as a good way to explore causation in order to find underlying principles (Yin, 2009) and therefore appropriate for examining the causal links between deploying a firm’s various resources, and resultant collaborative value creation.

Multiple-case design has been chosen due to the fact that evidence from multiple cases is always considered more compelling and the overall study is therefore regarded as being more

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robust (Herriott & Firestone, 1983). Due to the time constraint the analysis will be limited to only two case studies. However, analytic conclusions independently drawn from these two case studies will be more powerful than those coming from a single case (Yin, 2003). In addition, as each cross-sector partnership is unique, differences in context and circumstances can provide rich ground for cross-case discussion and analysis. If despite all the variables similar

conclusions arise from both cases, the external generalizability of the research findings will expand significantly (Yin, 2003).

B. Case study choice

For the purpose of this study two cross-sector partnerships were selected for analysis:

FrieslandCampina/Agriterra and Accenture/Plan International. Initial selection was made based on the information openly available on the companies’ websites and in the media (both

partnerships received coverage in the Dutch online newspapers). These partnerships sparked particular interest for the following reasons:

 The strategic approach to CSR exemplified by both FrieslandCampina and Accenture  The importance of the issues in the developing countries that these companies are trying to

address through cross-sector partnerships

 The ambition and possibility to scale up their projects in order to create significant social impact over a longer term

 The advanced stage and complexity of the partnerships in terms of alignment of mission and capabilities, scope of activities, and variety of resources deployed

 In both cases the companies provide consulting services in line with their core competencies

 Both partnerships are perceived as successful by the companies, NGO’s, and the mass media

The two partnerships share some similarities in terms of company size, ambition, potential magnitude of social impact and strategic CSR approach, but there are also some significant differences: industry, social cause chosen, and resources deployed on the company side (in one case, it’s both generic and firm specific resources, and in other case, firm-specific resources

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only). These similarities and differences can help to identify some patterns and provide ground for interesting comparisons.

After approaching all four companies and receiving initial agreement from three of them (Plan Netherlands, FrieslandCampina and Agriterra) to cooperate with the research, the decision was made to proceed with these two case studies.

C. Data collection

Stake (1995) and Yin (1994) identified six main sources of evidence in case study research: interviews, documents, archival records, direct observation, participant-observation and physical artifacts. In both case studies the first two sources of evidence have been used. Primary data collected through interviews was complimented by secondary data gathered through documentary research of press publications, corporate sustainability reports, project reports and websites.

The interviews were semi-structured, allowing for the stream of questions to be fluid rather than rigid, while a consistent line of inquiry was being pursued in the background (Rubin & Rubin, 1995). The interviewer made effort to ask the questions in an unbiased manner though in several cases possible answers were suggested to help interviewee to understand the

questions better. Most of the questions were open-ended, welcoming both factual information about the matter and the respondents’ opinions as response (Yin, 2003).

Some examples of the interview questions: What are the company’s core competencies and

how are they aligned with the activities carried out within the scope of this partnership? How do you understand the value created in this partnership? For the company? For the NGO? For individuals? For society? Which resources on the company side have been deployed to create this value? The complete list of interview questions can be found in appendix II. Each

interview took between 1-1.5 hours.

In the case of FrieslandCampina / Agriterra there was an opportunity to interview on both sides people who personally initiated the partnership formation and who are currently in charge of overall coordination (personal responsibility) and governance (as part of steering committee): Senior Project Manager on the FrieslandCampina side and Manager of Agribusiness Team on

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the Agriterra side. Both interviewees have also been directly involved in the field work, and are therefore ideally suited for the role of key informants in this case study. Data collected through interviews was complemented by the following documents: FrieslandCampina 2011 and 2012 CSR reports, signed MOU, articles in the press and detailed information about the implemented projects (objectives, participants, budgets, progress, results) on the agro-info.net website

IV. EMPIRICAL FINDINGS AND DISCUSSION

A. FrieslandCampina / Agriterra partnership case study

Partnering organizations profile

FrieslandCampina (“FC”) is one of world’s five largest dairy cooperatives, with over 14,000

members in the Netherlands, Germany and Belgium and more than 140 years of experience in cooperative entrepreneurship. FrieslandCampina provides around 1 billion consumers in Europe, Asia and Africa with dairy-based beverages, infant & toddler nutrition, cheese, butter, cream, desserts and functional dairy-based ingredients. In addition to consumer products the company also supplies to professional customers, in the food industry and the pharmaceutical sector (FrieslandCampina, 2012a). The company’s ambition is, on one hand, to bring essential nutrients of natural dairy to people worldwide, and on the other hand, to be the most attractive dairy company for the Cooperative’s member dairy farmers. FrieslandCampina’s CSR policy strives to demonstrate close involvement in responsible dairy production, and the company’s

route2020 strategy is focused on increasing the sustainability of dairy farming and the chains

for dairy processing and distribution, marketing healthy food, and supporting local food production in Asia and Africa by transferring knowledge and expertise to farmers in the dairy sector (FrieslandCampina, 2012b). FrieslandCampina’s work in the field of CSR is seemingly valued by its stakeholders, as for the second year in a row (2012 and 2013) the company ranks second among the 30 largest Dutch companies in the annual survey on CSR reputation

conducted by the Reputation Institute (Reputation Institute, 2013).

Agriterra is an agri-agency which supports farmers’ organizations in developing countries with

advice from experts from the Dutch agricultural sector and with finance from the Dutch government and other donors. Agriterra’s belief is that strong farmers’ organizations lead to economic growth and better distribution of income, hence the reduction of poverty, which supports democracy. Agriterra focuses on economic development by brokering various forms

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of cooperation among farmer organizations and agribusiness in developing countries and in the Netherlands (Agriterra, 2013).

Partnership’s history and scope

The two organizations have been working together since 2010, when Agriterra approached a FrieslandCampina’s employee who was registered in their database of industry experts (Agripool), with a proposal to participate in one of their field projects. A good personal and professional click led to growth of the informal initiative within FrieslandCampina, and increasing numbers of employees got involved in consulting services for Agriterra’s clients (dairy cooperatives in developing countries). The relationship was formalized by an MOU in 2012; by this time the initiative had grown significantly, and received recognition and support from FrieslandCampina’s higher management (including the CEO, the director of dairy

development program, the director of sustainability, and others) and had become an official and important part of the corporate social responsibility agenda. The partnership’s objective is to strengthen farmers’ organizations and cooperatives in developing countries through the deployment of knowledge from the highly advanced Dutch agri-sector. Today the partnership has reached an integrative phase where the flow of resources goes both ways:

 FrieslandCampina provides dairy farming experts for Agriterra’s consulting projects; their advice is aimed at making cooperatives bankable by increasing their organizational

capacity, improving the product quality and supply chain, drafting viable business plans, etc.

 Agriterra is in turn facilitating recruitment, selection and training of internal experts for FrieslandCampina’s Dairy Development Programme, carried out in the countries of FrieslandCampina’s current operations and aimed at expanding its local sourcing. The partners are currently cooperating in Indonesia, Malaysia, Vietnam, Uganda, Tanzania, Ethiopia, Kenya and Nigeria, and the list of countries is likely to increase in the future. Deployed resources, activities and outcomes

As follows from the interviews and related documents, the following FrieslandCampina’s resources have been deployed: knowledge, expertise, technological know-how’s, managerial

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practices, reputation and networks. The first four types have been leveraged directly in form of training and consulting services provided by FrieslandCampina’s experts in the field projects implemented together with Agriterra. Training and consulting occurred in the areas of general management, marketing, HR, supply chain, operations, product quality, financial management, business planning and performance, etc. No consulting has been provided pro-bono, but the fee paid by Agriterra was capped at an amount much lower than a standard consulting fee. The other two types of assets – FrieslandCampina’s reputation and networks – created indirect benefits for Agriterra by enhancing its reputation and visibility and giving access to an even wider pool of industry experts. Thus, only organization-specific resources have been deployed on FrieslandCampina’s side; no generic resources, money or in-kind, have been provided. As pointed out by the interviewees, there’s a high degree of fit between the cause and

FrieslandCampina’s core competencies and assets. A few quotes from the key informants on the resources deployed and its relevance will follow.

FC interviewee: “We have a lot of experience here, and they (*local farmer cooperatives) are

inexperienced in a lot of things”; “Because of the support we give Agriterra they can cherry pick the people they need in our company, if they need someone from marketing, someone from HR, someone from production, logistics, they just can pick them and the days they are taking out of our organization are paid for”; “It’s far less expensive than using consultants, and of course the competencies that people have here are a lot more aligned with what they need.”

Agriterra interviewee: “There’s a need for expertise in developing countries and there’s a

surplus of expertise here in Holland, and our role is to make a perfect match between those two, and then FC is an outstanding example”; “In principle we don’t work with professional consultants, but we use the expertise from the Dutch agricultural sector, and those are the cooperatives like FC”; “It can be on supply chain management, financial management, it can also be on business planning, it can also be on marketing, product development, HR”; “We know from experience that it’s really specific business, it’s really different working with farmer organization, with all its weaknesses and all its problems and challenges they have, it requires really good knowledge of how these institutions work”; “We work now as agribusiness team for 30-40 cooperative or farmer-led clients, and one third of them, I believe, is dairy, and of course FC has all the expertise that you need.”

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FrieslandCampina rarely gets involved in charity, seeing money and in-kind donations as unsustainable practice. FC interviewee: "In common we rather give our expertise to help people

for a next step than just give free donations.” After receiving the expert advice on business

development, client cooperatives are on their own to finance its implementation. FC interviewee:

“What I do at cooperative I’m supporting now for several years, whatever they have to do they have to pay for it themselves. Because it’s not sustainable, if it only works if you give it

(*referring to new equipment). In the end it will break down.” The FC interviewee provides

examples when in-kind donations from other organizations turned out to be destructing value: “I

would say it even works the other way around, when you give things away. What we’ve seen a lot is that cooling tanks that are given away to farmer organizations. They are very happy with it, they are very proud of it, sometimes they start using it, and what you see is that the milk that goes through such an installation is sold for the same price as not chilled milk. So even if they have it for free, they still have to put in some electricity, some other costs, some cleaning costs, repair, whatever. So in the end of the day they are in worse financial situation than before, because when they get it for free, they start using it even if it’s not profitable. So never, never give away.”

Table I summarizes the main activities where FrieslandCampina’s resources have been leveraged and provides concrete examples of implemented projects and outcomes. Table I. Forms and outcomes of FrieslandCampina’s resources deployment.

Type of asset deployed

Form of deployment (description of activities and examples of projects)

Outcomes (also includes expected future outcomes)

Knowledge and expertise

FC’s employees consult dairy cooperatives in developing countries in the areas of dairy production, marketing, HR, financial management, distribution, supply chain, operations, etc. They participate together with Agriterra in scoping missions, trying to identify local cooperatives with managerial capacity allowing for successful

implementation of provided advice. Selected cooperatives are then treated as clients for FC’s consulting services in the areas where improvement is needed. Advice is based on the FrieslandCampina’s employee’s

personal experience and best practices in the dairy industry.

Examples: Training of 300 farmers in

Provided advice helps local cooperatives to run their business optimally and ensure a stable income for member farmers. Example: Improved distribution system by setting up collection points in Nigeria and thus increasing sales opportunities. On the individual level it improves the livelihood of farmers and their families. On the society level it supports alleviation of poverty and stimulates local market development through increased purchasing power. Between 70,000 and 100,000 farmers have directly benefitted from improvements in cooperatives due to consulting services.

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Kiambaa cooperative in Kenya on fodder management, calf rearing and AI;

development of marketing plan and strategy; supply chain recommendations on log for tracking milk supply and development of Google maps and analytical tools;

development of performance measures and appraisal systems (Agro-info.net). FC and Agriterra are also working on standardized solutions in order to expand and upscale activities.

expertise it needs and is able to fulfill its mission. FC acquires local market

knowledge, establishes its presence in new markets and gets access to a network of contacts in local industry.

FC’s employees get a chance to use their skills for a good cause, which supports job motivation, staff retention and attraction of new talent.

Close interaction during the projects creates learning opportunities for both

organizations.

Technologic al know-how’s

FC consults local cooperatives on their technological processes, mainly concerning the quality of milk. This includes advice on equipment, implementing standards for quality control, supply chain optimization, etc. Such advice is provided by FC’s experts, both employees and member farmers, to the cooperatives supplying milk to FC locally in countries where it is currently operating (Indonesia, Vietnam, Malaysia and Nigeria), as well as to Agriterra’s clients in countries where FC doesn’t operate.

Example: Advising cooling tanks suitable for local electric connection in combination with ice banks, to overcome electricity failures.

Helps local cooperatives to increase dairy production volume and quality. The improved quality of milk means higher incomes for member farmers. Example: Farmers at Kiambaa cooperative now get paid 10% more than average for the milk they are selling because of improved quality due to enhanced chilling capacity. This success story was highlighted by a local radio station, which encouraged adoption of the practices by other cooperatives.

FC ensures good quality of milk supplied by local farmers for its own production needs and thus ensures the quality of its own products. And in countries where FC is not currently operating, the partnership helps to establish a base of potential future suppliers.

Managerial practices

Consulting local cooperatives on general management, business planning and performance and assistance in writing bankable business plans in order to get the finance from local banks which is needed for business development.

Examples: Training of management and board members; developing viable business plans.

Cooperatives are able to obtain financing from local banks needed for expanding their current operations, buying new equipment and building their own production facilities. Improved financial performance of cooperatives means better income for member farmers.

Reputation Publications in press. Mentions of partnerships by FC and Agriterra on their websites and in publications. Informal mentions of the partnership.

Association with FC improves Agriterra’s reputation and visibility and therefore attracts more organizations to cooperate on their cause.

Networks FC uses its extensive network in the dairy industry to find the right expertise needed for projects. In addition, FrieslandCampina leverages the relationships with third parties such as the Dutch government (embassies), Wageningen University, Rabobank

foundation, Rabobank Development, etc., to support the projects.

Availability of the right expertise. Support and cooperation from third parties on project implementation.

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Deploying FrieslandCampina’s organization-specific resources in partnership with Agriterra has resulted in positive outcomes on the micro, meso and macro levels, and thus created several types of collaborative value.

Transferred resource value is the easiest to track: FrieslandCampina’s sector-specific

knowledge, expertise, technological know-how’s and managerial practices have been transferred to the local farmer cooperatives by means of training and consulting, creating durable economic and social value. Cooperatives are now able to run their business more efficiently and therefore the annual family income of member farmers has improved and employment opportunities have increased. On the micro level it has had positive effects on individuals’ livelihoods; on macro level it has supported poverty alleviation and fostered emerging markets’ development through increase of purchasing power. On meso level FrieslandCampina experienced benefits for its own supply chain by improving the quality of milk sourced from local suppliers in the countries where it operates. FC interviewee: “We collect milk from cooperatives in Asia and the quality of

that milk is not good enough at the moment for us, so through the development programs we try to improve the quality of milk collected by the cooperatives, so we can buy a better quality of milk.” In addition, the company’s improved visibility in local markets due to the Dairy

Development Program leads to better sales possibilities. In the countries with no current

operations FrieslandCampina benefits from exploring new markets, establishing its presence, and creating networks of potential suppliers for the future. FC interviewee: “It’s very important for

FrieslandCampina to be working around markets of the future, so we see what in the coming years maybe becomes interesting for us, and we already are there, know the market, know the people, get entrance”; “That will give us a better overview and a better start if we want to start with acquisitions.” Here we see an obvious example of shared value, because the company will

derive benefits from contributing to the prosperity of the local community. Transferred resource value is also being accrued on the meso level by Agriterra, because leveraging

FrieslandCampina’s core competencies allows it to successfully pursue its mission of supporting cooperatives in developing countries.

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Another type of value which is easily demonstrable in this case is interaction value; shared field work experience at the early stage created relational capital in terms of mutual trust, personal bonds and commitment to the project, which allowed the collaboration to move on to the integrative stage, where even closer cooperation enabled learning opportunities and knowledge sharing between the partners, further enhancing interaction value received by both partners. With the move to the integrative stage, synergistic value arose from combining

FrieslandCampina’s sector-specific skills and Agriterra’s ability to assign those skills

appropriately and to manage all organizational details. Since joining forces, the partners have been able to scale up the activities and pursue innovation. They are currently collaborating to create some standardized solutions for cooperatives at different stages of development. Agriterra interviewee: “You have different development phases of a cooperative, so we are considering

looking at what is needed in which development phase and then working on a standard tool or solution, for instance, on financial management, or training modules on governance and leadership, and the same can be done for business plan development. Some we already have developed outside the partnership with FC, but there’s still a long way to go. There is an ambition also to upscale our outreach, to be able to work not only with 10 or 15 dairy cooperatives in Kenya, but to be also able to work with 50 or 100.” FC interviewee: “We’re working on more standardization, that’s for sure, but what we’re still doing is just trying to learn ourselves and do things better than other people.”

The last type of value, associational value, is being accrued by Agriterra on the meso level because of FrieslandCampina’s reputation. Having such a large, well-known, and respected partner from the industry helps Agriterra to gain credibility in the eyes of other potential partners from the private sector and also to attract general attention to their cause. Agriterra interviewee:

“It’s helping to upscale profile of Agriterra to other businesses. The moment you tell you have a partnership with FrieslandCampina, or the moment they see Nuzakelijk or other publications, where FrieslandCampina is talking about us, then they have a different look at us.”

Associational value for FrieslandCampina can be observed at the micro level in terms of improved employee motivation and retention, based on existing employees’ desire to use their skills for a good cause, and also helps attract young talent who care about company’s CSR policy. FC interviewee: “Getting young people involved and being attractive for young people is

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really important for FC, but also keeping the older ones, the senior ones, interested in the company, I think that’s very important for us.” Agriterra interviewee: “We provide a unique opportunity for employees of FC to share their knowledge in a completely different context, somewhere where they’ve never been, very unfamiliar for them and which makes them very enthusiastic and also committed to the company; it also helps to attract and retain young potentials.”

The analysis of FrieslandCampina case evidence reveals that leveraging organization-specific resources such as knowledge, expertise, technological know-how’s, managerial practices, networks and reputation can lead to creation of four different types of collaborative value: associational, transferred resource, interaction and synergistic, and thus supports the theoretical model proposed earlier. On the practical side, the data shows how exactly the benefits arise from the deployment of resources and to which parties and at which levels they are being accrued, illustrating the creation of shared value.

Organizational fit as moderating factor

Separate attention should be paid to the moderating effect of organizational fit, which can be assessed in terms of cause, strategy, linked interests, core competencies, culture, resources, work force and target market. The summary of the evidence presented below (Table II) supports the conclusion that a good organizational fit in the case of FrieslandCampina / Agriterra enhances the potential for collaborative value creation. Good fit is observed in the alignment between the cause and company’s strategy and interests, similarities in culture among the two organizations, good personal click among the work forces, good match between required expertise and the company’s core competencies, and a high degree of complementarity of resources between the two organizations.

Table II. Fit assessment and moderating effects.

Fit Assessment of fit Evidence of moderating effect Cause Cooperative farmers from developed dairy sector

in the Netherlands help their peers in developing countries

Logical fit between the company and the cause enhances associational value. Evidence: big number of internal experts and member farmers motivated by opportunity to be part of the

Value creation in business-NGO partnerships for development : multiple case study of company resources deployment.

MBA Thesis