Journal of Business Research 68 (2015) 1468–1474

Contents lists available at ScienceDirect

Journal of Business Research

Creating competitive advantage by institutionalizing corporate

social innovation☆
Maria Elena Baltazar Herrera ⁎
Asian Institute of Management, Philippines

a r t i c l e i n f o a b s t r a c t

Article history: This study builds on corporate innovation, social innovation, and corporate social innovation literature to develop
Received February 2014 a preliminary theory. The study then uses case studies to build a framework that describes factors leading to
Received in revised form September 2014 successful corporate social innovation (CSI).The study focuses on social innovations that create social value and
Accepted January 2015
competitive advantage. In the framework, three organizational components enhance CSI: strategic alignment,
Available online 16 February 2015
institutional elements, and clarity in intent. Three institutional elements enable CSI processes: stakeholder
Keywords:
engagement, operational structures and processes, and organizational culture. Integrating CSI into strategy and
Social innovation operations creates opportunities for co-creation, thereby creating shared value and enhancing competitive
Corporate social innovation advantage. This study concludes by highlighting managerial implications and future research opportunities.
Shared value © 2015 Elsevier Inc. All rights reserved.
Case study method
Co-creation
Competitive advantage

1. Introduction performance (Herrera, 2007). For specific CSR programs, Porter and
Kramer (2006) call this double effect shared value. CSR's positive effect
Innovation heavily influences competitiveness (Mintzberg, 1994), on financial performance is a result of greater competitive advantage
and failure to innovate generally decreases competitiveness (Ferauge, and reputation (Saeidi, Sofian, Saeidi, Saeidi & Saaeidi, 2015).
2012; Herrera, 2007). This research focuses on corporate social innova- The literature on CSI is sparse but growing (Nelson & Jenkins, 2006).
tion (CSI), which resolves social concerns (Phills, Deiglmeier, & Miller, CSI provides business sustainability (Eccles & Serafeim, 2013) and
2008, Fall) and considers shareholder value. increases competitive advantage (Fiorina, 2004; Hana, 2013), but the lit-
Social innovation is relevant in global strategy because society erature ought to provide a better understanding of how corporations
expects international corporations to be socially responsible (Snider, adopt and integrate social innovation into strategy and operations. This
Hill, & Martin, 2003). Stakeholder and macro-environment assessments study contributes to filling the literature gap by describing organizational
are crucial for successful innovation (Ferauge, 2013). Global companies components that enhance CSI. The study addresses the following research
must balance global corporate purpose, reputation, and strategy with questions: How do companies implement CSI? How does CSI increase
local realities (Husted & Allen, 2006). competitive advantage? How do strategy and operations integrate CSI?
A company's ability to sense and respond strategically to opportuni- What institutional mechanisms increase the likelihood of CSI success?
ties and threats enhances competitive advantage (Li & Liu, 2014). Given the sparse literature on institutional mechanisms for integrat-
Because corporate social responsibility (CSR) involves continually ing social innovation in strategy and operations, this study first reviews
evaluating corporate influences and relationships with stakeholders literature and theories to provide a foundation for theory building. The
and the environment, CSR enables management to identify and respond literature review covers CSR, innovation, corporate strategy, and
to evolving strategic opportunities and challenges. The corporate competitive advantage. The literature review focuses on what triggers
challenge is implementing CSR while advancing corporate goals. social innovation, the social innovation process, organizational barriers
Implementing CSR, however, can improve corporate social and financial and enablers of social innovation, and mechanisms that enhance CSI.
The review leads to a preliminary framework that uses elements
☆ The author thanks Maria Cristina A. Uy for her research and editing support during the common to business innovation and CSR. The framework's first version
writing of this essay. The author gratefully acknowledges institutional support from the is the organizing framework for the 2012 Asian Forum on Corporate
Asian Institute of Management. Social Responsibility.
⁎ Asian Institute of Management, Eugenio Lόpez Foundation Building, Joseph R.
McMicking Campus, 123 Paseo de Roxas, Makati City 1229, Philippines. Tel./fax: +63 2
Three case studies evaluate and extend the preliminary framework
892 4011 local 2851. for institutionalizing social innovation. The first case study examines
E-mail address: [email protected]. 3M, a company with global recognition for creating competitive

http://dx.doi.org/10.1016/j.jbusres.2015.01.036
0148-2963/© 2015 Elsevier Inc. All rights reserved.
 M.E.B. Herrera / Journal of Business Research 68 (2015) 1468–1474 1469

advantage through innovation. This case study tests and extends the innovation. Finally, institutionalization involves embedding and scaling
preliminary framework. The second case study examines several indi- up across the entire organization.
vidual cases and identifies significant elements influencing successful Fully implementing a social solution can take months, years, or even
CSI. Most cases involve partners of the Asian Institute of Management decades. A disciplined approach to implementing social solutions helps
(Ramon V. del Rosario, Sr. Center for Corporate Social Responsibility) achieve positive, widespread social outcomes (Murray, Caulier-Grice, &
and recent nominees for the Center's Asian CSR Awards. All cases Mulgan, 2010).
provide exhaustive information from company executives, employees,
and stakeholders. The third case study examines CSI processes within 2.3. Institutionalizing social innovation
Intel, which treats innovation as a source of competitive advantage.
This case study tests the full framework. The Intel case study uses data Innovation is most powerful when organizational systems and struc-
from literature and documents, presentations, interviews, CSR program tures can institutionalize this innovation. Organizational structures—both
case studies, and site visits. Because of its extensive nature, the second formal and informal—yield innovation benefits for companies (Hana,
case study does not appear in full in this article. Fig. 3, however, presents 2013; Pfitzer, Bockstette, & Stamp, 2013; Tushman & Nadler, 1986).
a summary of key examples from the second case study. Full details of The framework herein describes the institutionalization of social
the 3M and Intel case studies appear later in the article. innovation. The framework has three key components: 1) strategic
alignment, 2) institutional elements that enable social innovation, and
2. Theoretical framework 3) clarity in intent. Revisions to the framework draw upon inputs
from practitioners attending the 2012 Asian Forum on Corporate Social
2.1. Defining social innovation Responsibility. Systematic assessment of the business context helps
achieve strategic alignment. Identification of social objectives helps
This research adopts the following definition of social innovation: clarify corporate intent. The framework helps companies set social
Social innovation is a measureable, replicable initiative that uses a goals consistent with standard CSR outcomes (Herrera, 2011b) (Fig. 2).
new concept or a new application of an existing concept to create share-
holder and social value. Identifying drivers, enablers, and barriers to 2.3.1. Strategic alignment
idea generation, experimentation, and implementation is critical to Significant business innovations can result from integrating environ-
understanding CSI institutionalization. mental and social issues into corporate strategy (Fiorina, 2004). Socially
responsible companies systematically integrate market and non-market
2.2. The process of social innovation conditions into strategic planning (Herrera, 2007; Sabir, Kalyar, Ahmed,
& Zaidi, 2012). In particular, during the environment analysis and strate-
This study uses a framework (Fig. 1) that establishes a five-stage gic assessment phase of strategic planning, companies should already be
process combining CSR implementation and business innovation. The considering social and sustainability elements. In addition to reviewing
five stages are assessment, design, development, systematization, and market-related factors, management should review non-market factors
institutionalization and scaling up. The first stage of embedding social through footprint and stakeholder analysis. Non-market factors should
innovation is the assessment stage (active sensing), which involves also contribute to the environment-sensing and strategic assessment
continuously and actively gathering information. This active sensing mechanisms that are part of strategy implementation.
provides employees with triggers for innovative ideas that lay the foun- The business context consists of stakeholders, the corporate footprint,
dation for the design or ideation stage. Pilots during the development and general strategic considerations. Analyzing the corporate footprint
stage then test the design. Results of the pilot systematize the involves analyzing company operations' economic, environmental, and

Fig. 1. Social innovation process.

1470 M.E.B. Herrera / Journal of Business Research 68 (2015) 1468–1474

Fig. 2. Institutionalizing social innovation.

social impact. Footprint analysis involves evaluating the extended value 2.3.2.1. Stakeholder engagement. Successful social innovation requires
chain, which comprises processes, inputs, outputs, by-products, stakeholder acceptance and cooperation (Enright & Bourns, 2010).
suppliers, distributors, business partners, and disposal of product and Effective stakeholder mechanisms allow companies to identify social
packaging. Stakeholder assessment involves evaluating the interests innovation opportunities. Active stakeholder engagement aids the
and influences of individuals with a stake in company operations. active-sensing stage and enhances efficiency during piloting and
Stakeholders can be direct, indirect, or mediating (Herrera, 2011a). scaling-up stages. If CSI leverages corporate capabilities and creates
Stakeholder analysis helps companies identify and characterize social social value, then this CSI will build social capital. Active stakeholder
concerns and stakeholder collaboration opportunities (Herrera, 2011b). collaboration aids co-creation and enhances competitive advantage.
General strategic considerations include the company's general situation,
core values, philosophies, resources, and competencies. Using the social 2.3.2.2. Operational structures and processes. Operational structures and
lens during strategic assessment ensures that strategy favors opportuni- processes refer to policies, structures, and processes that enable CSI.
ties for social innovation and ensures that social innovation assessment Operational structures and processes include accountability structures,
is strategic. Just as active monitoring of the environment enhances project initiation protocols, development and evaluation of new ideas,
market and operational innovations, active sensing of non-market systematic procedures to socialize and propagate successful innova-
factors enhances CSI. tions, and systems for providing innovation opportunities. Examples
of operational structures and processes are institutionalized opportuni-
2.3.2. Institutional elements ty scanning, institutionalized idea sessions, social idea development
The framework presents institutional mechanisms that drive, boards, and institutionalized funding.
enable, and embed social innovation values and processes: stakeholder
engagement, operational structures and processes, and organizational 2.3.2.3. Organizational culture. Organizational culture includes corporate
culture (Fig. 3). values, organizational norms, and employee attitudes. Management can

Fig. 3. Examples of social innovation.

 M.E.B. Herrera / Journal of Business Research 68 (2015) 1468–1474 1471

encourage social innovation through corporate values supporting time on innovation-related activities. This program strengthens 3M's in-
experimentation, risk-taking, and collaboration. Structural democrati- novation culture and creates opportunities for employees to engage in
zation can also encourage social innovation. Social innovation is more personally meaningful activities. Some examples of 15 Percent Time
likely to increase competitive advantage when both operational and products include Scotch® Brand Tapes, Post-it® Notes, and Scotchgard™
organizational mechanisms allow co-creation. Fabric Protector (3M, 2012a). 3M has a clear active-sensing policy for
both market and non-market factors. 3M also has a clear policy of active-
2.3.3. Focus areas ly engaging stakeholders in co-creating products and services.
Clarity of intent with regard to business outcomes is often easy, but
clarity with respect to desired social outcomes can be more challenging. 3.2. Case study: Intel
Social goals fall into one of three focus areas: governance and society,
customer and product responsibility, or value chain and environment. Intel is one of the giants of IT innovation (Intel, 2014a). Through its
The focus area of governance and society refers to managing the products, Intel is able to champion and gain from social innovation.
company's relationship with society in general through initiatives Intel's environmental sustainability and social responsibility initiatives
such as community involvement, education and culture, livelihood address social issues and business concerns. The company traces its
programs, technology development and access, education, and health journey along the maturity curve—from CSR awareness to an ability to
care. This focus area also includes ethical and governance practices in use CSR for transformation (Fig. 5).
areas such as human rights and transparency. The focus area of product
responsibility and consumer rights refers to consumer-related initia-
tives (e.g., fair marketing, product labeling, product safety, and sustain- 3.2.1. Business context: footprint, stakeholders and strategic considerations
able consumption). The focus area of environment and value chain Intel's business context focuses on adopting socially innovative
management involves value chain management for optimizing the approaches to be globally competitive. Intel incorporates environmental
social and environmental footprint (e.g., host community engagement performance goals in its operations to improve energy efficiency,
and environmental protection practices). emission reduction, and resource conservation. In 2008, Intel became
the largest voluntary purchaser of green power in the United
3. Illustrative case studies States.Clearly, Intel includes non-market factors in its strategic assess-
ment and monitoring.
3.1. Case study: 3M Intel's strategy responds to customer demand and product innova-
tion to make Intel a global IT leader (The Times 100, 2014). Intel
As a global innovation company, 3M claims that innovation is in its presents itself to the industry and international community as an inno-
DNA. Innovation is in the essence of 3M's strategy, culture, operations, vation champion. In promoting innovation through public policy, Intel
and organizational structures and practices. 3M's innovation culture is advocates tax and trade, health and environment, content, communica-
team based and collaborative. Customers, suppliers, and other stake- tions, and privacy innovation. Intel constantly explores how technology
holders are innovation partners. can transform lives. Intel identifies fresh marketplace opportunities
while managing to broaden and deepen technology applications,
3.1.1. Business context including improving education and health care among marginalized
3M's innovation culture and corporate citizenship strategy responds sectors. Intel practices active sensing to drive innovation in both market
to its business context. 3M's environmental footprint consist of gas and non-market aspects of the business.
emissions, air emissions, water use, energy consumption, waste dispos-
al, and toxic chemicals the production process generates. Intellectual 3.2.2. Institutional elements: stakeholder engagement, operations, and
property rights and patent protection are important to 3M's successful organization
innovation strategy. The ability to change and successfully engage Intel's key organizational processes and structures exemplify inno-
with new distributors and suppliers and to bring products to multiple vation. Intel develops stakeholder-specific programs that create shared
markets is crucial to 3M's success (Fig. 4). value. To engage stakeholders, Intel's CSR department conducts annual
face-to-face meetings and generates discussion using social media
3.1.2. Institutional elements: stakeholder engagement, operations, and (Intel, 2014b). Intel Education Programs focus on expanding academic
organization opportunities. Intel argues that technological literacy alone is insuffi-
3M's history contributes to the cultural bias toward a collaborative cient to address poverty but that technology can be a vehicle for social
approach to innovation. Collaborative mechanisms include stakeholder inclusion through learning, livelihood, and employment.
consultation, employee involvement in R&D, and active participation in Intel's stakeholder engagement platforms help develop strong rela-
research networks. AccountAbility's AA1000 Stakeholder Engagement tionships with institutions and individuals to improve understanding
Standard is the basis of 3M's global stakeholder engagement program. of market opportunities and trends. These characteristics allow Intel to
3M consults consumers in product development and participates in contribute to society and build competitive advantage, either by broad-
research networks to develop eco-friendly products. Furthermore, 3M ening markets or by developing innovative, low-cost solutions.
works with the World Resources Institute and the Design for the Intel's environmental programs include the Intel Open Energy Initia-
Environment Program. 3M adopts the triple bottom line approach. tive, LEED green building certification, water use and recycling, and
3M's 2015 sustainability goal is to “reduce volatile air emissions 15%, solid waste recycling program. Intel's supplier code of conduct covers
reduce solid waste 10% and improve energy efficiency by 25%, all from labor and environmental standards. Intel also supports the global
a 2010 base” (3M, 2012b). campaign against conflict minerals.
3M's innovation culture encourages exploration; the company is Intel promotes an innovation culture by communicating that
open to new technology—which may not have immediate practical innovation is part of the company's competitive business strategy. Intel's
applications—and encourages collaborative internal networking through innovation culture relies on employees' capabilities and strengths. For
the Technical Forum, formed in 1951. 3M exhibits a strong culture of example, half of Intel's 82,000 employees “have engineering degrees
flexibility, responsiveness, and change. The company believes that the and a quarter have master's degrees” (Karlgaard, 2011, February
best approach to innovation involves people working together, especial- 16).Through IT labs and research grants, employees collaborate with
ly in close coordination with customers and suppliers. Accordingly, the co-workers. Intel also funds research projects between employees and
15 Percent Time Program encourages employees to spend 15% of their universities. Intel's integrated approach to social innovation clearly
1472 M.E.B. Herrera / Journal of Business Research 68 (2015) 1468–1474

BUSINESS CONTEXT

Footprint. Products and packaging,

manufacturing, warehouse and delivery

Stakeholders. Employees are 3M’s most

important stakeholder. 3M engages with
suppliers and customers, and collaborates
with communities and regulators.

Strategic Considerations. 3M’s innovation

strategy is central to 3M’s success as a
business. Strong relationships with key
stakeholders ensure a robust social license to
operate. Cooperation to bring new products
and technologies to market.

Fig. 4. Integrating social innovation and sustainability using 3M's innovation process, culture, and products.

allows the company to create competitive advantage while creating indicates that a disciplined approach to social innovation in all five
social value (Fig. 6). stages increases the likelihood of success. Results also indicate how
companies can institutionalize mechanisms that increase the likelihood
4. Implications of initiating and implementing successful social innovation. Companies
can use this study's conceptual framework to improve CSI approaches
This study has important implications for companies seeking to and create competitive advantage.
engage in social innovation. The research shows that a deliberate,
systematic approach to social innovation can create both competitive 5. Discussion
advantage and social value. Private companies can engage in social
innovation in many ways, but a consistent approach and support from This study explores social innovation implementation and presents a
institutional mechanisms increase the likelihood that companies conceptual framework that companies can use to improve social
initiate and successfully implement social solutions. The research innovation implementation. Companies wishing to promote CSI must

Fig. 5. Intel's CSR maturity curve. Source: Jacobson (2013).

 M.E.B. Herrera / Journal of Business Research 68 (2015) 1468–1474 1473

Fig. 6. Integrating social innovation and sustainability using Intel Corporation's innovation process, culture, and products.

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