From Organization to Organization:

On Creating Value James E. Austin

At the heart of effective collaboration is value cre-

ation. 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 particu-

larly important to society because the growing

magnitude and complexity of a multitude of societal

problems transcend the capacity of individual orga-

nizations to solve them. Therefore, it is vital that

academics and practitioners deepen the understand-

ing of the collaborative value creation process.

This scrutiny starts with a paradox: the differences

across sectors constitute both obstacles and advan-

tages 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, orga-

nizational and governance structures, and decision-

making and administrative processes. Nonprofits,

businesses, and governmental agencies are very dif-

ferent creatures. Transcending this host of potential

incompatibilities is a most demanding task, but as the

existence of innumerable cross-sector social part-

nerships 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 orga-

nizations to collaborate across sectors can be quite

different and could be a source of incompatibility if

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 business-

to-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 opportu-

nity 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. How-

ever, 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 phe-

nomenon 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 ben-

efit 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 signifi-

cant transformative force in society is rooted in the

Journal of Business Ethics (2010) 94:1315 Springer 2011DOI 10.1007/s10551-011-0787-z

combination of their organizational characteristics,

collaboration history, and motivations (Seitanidi and

Koufopoulos, JBE SI). Collaborating institutions

capture benefits that may strengthen them individ-

ually, 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 eco-

nomic 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 sec-

toral 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 neces-

sary 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 cross-

sector collaborations represents a powerful form of

social entrepreneurship, which requires champi-

ons within each partnering organization who

energize and engineer this integration (Varro et al.,

JBE SI). Central to achieving this process of inte-

gration is joint formulation of a coherent collabo-

ration strategy (Clarke and Fuller, JBE SI).

The value-generating capacity of an alliance can

grow over time. For example, with nonprofit-

business partnerships there is a Collaboration

Continuum consisting of philanthropic, transac-

tional, 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 rely-

ing 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 stra-

tegic 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 inte-

gral 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 orga-

nizational 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 collab-

oration so that it transcends their presence as foun-

ders. The test of true leadership is the creation of the

14 James E. Austin

organizational capacities and commitment that en-

ables the alliance to continue and improve without

the founder.

To the extent that sustainable cross-sector alli-

ances 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 har-

monious communities with greater capacity for

collective problem-solving. Vigorous alliances rein-

force 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.

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

15From Organization to Organization

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