Springer 2011

Journal of Business Ethics (2010) 94:1315

DOI 10.1007/s10551-011-0787-z

From Organization to Organization:

On Creating Value

At the heart of effective collaboration is value creation. It is what motivates, sustains, and produces
impact from cross-sector partnering. In it lies the
answer to the fundamental question posed by this
Special JBE Issue: How is society better off due to the
joining of efforts of organizations across sectors?
The basic theoretical premise, which has been
confirmed in practice, is that at the meso level of
inter-sectoral alliances new value can be created by
combining each organizations distinctive resources
and capabilities. Together they can do more and do
it more effectively than separately. This is particularly important to society because the growing
magnitude and complexity of a multitude of societal
problems transcend the capacity of individual organizations to solve them. Therefore, it is vital that
academics and practitioners deepen the understanding of the collaborative value creation process.
This scrutiny starts with a paradox: the differences
across sectors constitute both obstacles and advantages to collaboration. The partnering challenge is to
overcome the former and leverage the latter. Among
the barriers are differences in missions and strategies,
values and cultures, capacities and resources, organizational and governance structures, and decisionmaking and administrative processes. Nonprofits,
businesses, and governmental agencies are very different creatures. Transcending this host of potential
incompatibilities is a most demanding task, but as the
existence of innumerable cross-sector social partnerships reveal, doable. The articles in this Special
Issue enrich our comprehension of a multitude of
the elements critical to this process and I will flag
some of those links with reference to the authors in
this JBE Special Issue (SI).
The motives potential value that propel organizations to collaborate across sectors can be quite
different and could be a source of incompatibility if

James E. Austin

they give rise to conflicting objectives among the

partners (Selsky and Parker, JBE SI). However, each
partners seeking different types of benefits from the
collaboration can also be what creates compatibility.
In same sector partnerships frequently the type of
value generated is the same, for example, in businessto-business collaborations there is economic value
created which the partners must divide between
them. This can readily lead to a zero sum situation in
which the more one gets the less the other receives. In
cross-sector partnerships, there is often the opportunity for positive sum gains because each partner is
seeking different kinds of benefits, e.g., a company
might see as a primary benefit an enhanced corporate
image or stronger relationships with key stakeholder
groups, whereas the collaborating nonprofit might be
seeking additional monetary resources, organizational
capabilities, or infrastructure to support an expansion
of its social services (Austin et al., 2004). There is
always a value exchange occurring in collaborations
and the different optimizing functions of partners
from different sectors amplify the chances for finding
a mutually agreeable shared benefit formula. However, that formula is generally not simple arithmetic
but more akin to the complexity of calculus. Equating
benefits that are different in kind as well as amounts is
facilitated by the translating capacity of the phenomenon of beauty is in the eyes of the beholder.
In the end, if each partner perceives the exchange as
fair, then there is a solid foundation for sustainable
collaboration.
While reaching a fair agreement is essential to a
harmonious relationship, from a societal welfare
perspective the concern goes beyond how the benefit pie is divided among the collaborators. The
larger issue is how much social value is created. The
potential of cross sector partnerships to be a significant transformative force in society is rooted in the

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James E. Austin

combination of their organizational characteristics,

collaboration history, and motivations (Seitanidi and
Koufopoulos, JBE SI). Collaborating institutions
capture benefits that may strengthen them individually, but how much of that additional capacity
leads to betterment of the larger society? Thus, the
partnering value assessment needs to be twofold:
collaborator benefits and societal benefits. The
measurement of the simultaneous creation of economic value accruing to individual partners and
social value produced for others in society is a
complex area which is receiving increasing scrutiny
by academics and practitioners (Marquez et al.,
2010). New assessment mechanisms are needed to
elucidate and quantify how producing economic
value can generate social value and vice versa
(Cornelius and Wallace, JBE SI).
Even before the type of value generated and how
the benefits are distributed, of primordial interest is
how much value is generated and what determines
that. A central driver of value creation is the type of
resources mobilized by each partner and how they
are used in the collaboration. Because of their sectoral differences, each organization brings to the
table distinctive resources. But within the portfolio
of resources, some are more significant than others.
It appears that greater value is possible when partners
apply their different core competencies, that is, those
resources and capabilities that are key determinants
of their respective organizational success. For
example, all businesses have financial resources that
enable them to make cash contributions to partners.
However, those financial resources are seldom the
key to a companys success, which is more likely to
be rooted in assets such as technical knowledge,
marketing and communication skills, distribution
infrastructure, customer credibility, and information
technology. Monetary donations are often a necessary component of collaborations but deploying
these other sets of capabilities could be a much more
distinctive and valuable contribution to the alliance.
These other inputs simply could never be purchased
by the nonprofit or governmental partner.
But beyond each partner deploying its distinctive
competencies, it is the combining of each of the
partners respective core resources that increases the
potential benefit. Their integration could create a
unique constellation of capabilities that constitute an
innovative and more effective approach to a tena-

cious social problem. In this sense, creating crosssector collaborations represents a powerful form of
social entrepreneurship, which requires champions within each partnering organization who
energize and engineer this integration (Varro et al.,
JBE SI). Central to achieving this process of integration is joint formulation of a coherent collaboration strategy (Clarke and Fuller, JBE SI).
The value-generating capacity of an alliance can
grow over time. For example, with nonprofitbusiness partnerships there is a Collaboration
Continuum consisting of philanthropic, transactional, and integrative stages in which the partners
increasing deepen their relationship, achieve greater
congruency of mission, values, and strategy, create
organizational fusion, and find increasingly powerful
ways to combine their key competencies (Austin,
2000). Powerful collaborations need to be vigorous
learning organizations continually searching for
more efficient ways to work together and more
effective means of generating value. The sectoral
differences constrain each partner from simply relying on existing organizational structures or processes
and require learning how to operate in the partners
organizational realm (Rivera-Santos and Rufin, JBE
SI). Similarly, each partner brings to the relationship
distinct value creation frameworks, which must be
recognized and reconciled over time (Le Ber and
Branzei, JBE SI). Cross-sector collaborations are rich
learning laboratories.
The realization of the full potential value of strategic social partnering is greatly dependent on how
the relationship is managed. Micro level interactions
are a key ingredient to this (Kolk et al., JBE SI).
Interpersonal relationships between leaders and staff
in the partnering organizations can determine the
level of trust, quality of communication, and degree
of effort vital to successful implementation. An integral part of this process is respect for and sharing of
organizational values, because values create value.
This is especially challenging and important when
there are distinct cultural values that shape the organizational values (Murphy and Arenas, JBE SI).
The role of the individual social entrepreneurs
who lead the creation of these alliances is central, as
pointed out by Waddock (JBE SI), but one of the
challenges they face is to institutionalize the collaboration so that it transcends their presence as founders. The test of true leadership is the creation of the

From Organization to Organization

organizational capacities and commitment that enables the alliance to continue and improve without
the founder.
To the extent that sustainable cross-sector alliances emerge, then institutional social capital has
been created. That has a societal benefit by
increasing greater empathy and understanding across
sectors, which in turn can contribute to more harmonious communities with greater capacity for
collective problem-solving. Vigorous alliances reinforce a noted trend toward convergence among
sectors in their capacity and orientation toward
generating social value (Austin et al., 2007). The
imperative of finding innovative solutions to societal
problems that increasingly hinder mission attainment
of organizations from all sectors is growing clearer to
all. Similarly, there is rising recognition that such an
imperative can only be achieved through strategic
collaboration across sectors. In this century, the
organizational modality of choice for generating
significant societal and organizational value will
increasingly be cross-sector partnerships. Deepening
our knowledge and practice of such alliances is
essential to progressing down this important path.

15

References
Austin, J. E.: 2000, The Collaboration Challenge: How
Nonprofits and Business Succeed Through Strategic Alliances
(Jossey-Bass, San Francisco, CA).
Austin, J. E., R. Gutierrez, E. Ogliastri and E. Reficco:
2007, Capitalizing on Convergence, Stanford Social
Innovation Review 5(1), 2431.
Austin, J., E. Reficco, G. Berger, R. M. Fischer, R.
Gutierrez, M. Koljatic, G. Lozano, E. Ogliastri, and
the SEKN Research Team: 2004, Social Partnering in
Latin America (Harvard University Press and the David
Rockefeller Center for Latin American Studies,
Cambridge, MA).
Marquez, P., E. Reficco, G. Berger and G. Lozano: 2010,
Socially Inclusive Businesses in Iberoamerica: Challenges and
Opportunities (Harvard University Press and the David
Rockefeller Center for Latin American Studies,
Cambridge, MA).

Harvard Business School,

Boston, MA 02163, U.S.A.
E-mail: jaustin@hbs.edu

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