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Business in Society

 

The Concepts of
Competitiveness, Innovation and Responsibility

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepared
by: Pietro Gerardi

 

 

 

 

 

 

 

 

 

 

December 18, 2017

 

ABSTRACT

Competitiveness, innovation and responsibility, taken alone, are three
intangible concepts, hardly measurable and definable only through a specific
context. However, there is a business area in which they are well
interconnected and essential for a superior management performance: Corporate Social Responsibility (CSR)
(Freeman, 1984). Before assessing the interaction among these three concepts, it
is relevant to define them in the company’s context and, after that, understand
the value carried out for the society through their interaction. Ultimately,
given that CSR is in the interest of both enterprises and society, it is
essential to integrate this new sustainable approach into the organizations.

 

THE CONCEPT OF COMPETITIVENESS, INNOVATION AND
RESPONSIBILITY IN A BUSINESS AND THEIR INTERCONNECTION

 

Competitiveness is usually related to productivity,
but nowadays it is a broader concept that not only focuses on economic outcomes
but also involves the fundamental element of sustainability to ensure
high-quality growth for the firm and to allow the society to be prosperous in
the long-term (World Economic Forum, 2017). Given that there are many factors affecting
competitiveness (e.g. environment, regulations, scarcity of resources, industry…),
it is always important for the company to understand which are the ones that
drive its business and to set specific goals in that area in order to gain a
competitive advantage over the competitors. However, according to the World
Economic Forum, the concept of competitiveness in the recent decades turned out
to go beyond “the usual
boundaries of economic growth in order to include both the tangible and
intangible necessities of life1”. This
definition put emphasis into one crucial aspect of company’s development: the
sustainable impact in the society. Thus, in this essay, I will consider the
concept of sustainable competitiveness as the one that the company has to
pursue to lead the business in which operates.

 

Innovation is a
specific function of entrepreneurship through which, according to Ducker, the
investor “either creates new wealth
producing resources or endows existing resources with enhanced potential for
creating wealth2”.

In addition to that, innovation not only pertains to the new products or
the new markets the company can pursue, but also to the relationship with the
employees and, in general, the stakeholders, and the vision and culture the
company wants to foster. In fact, co-creation leads to innovation, that
implements company’s development. Overall, innovation implies challenging the
past frameworks and being motivated to overcome together the obstacle of habit.

 

Ultimately, in a
business environment, responsibility is a value related to the company’s impact
in the society and is incorporated in one of the most critical modern management
concept: CSR. There is growing empirical evidence that CSR can
significantly implement social progress and create shared value for all the
stakeholders (Porter, 1991), including the society and those who do not
participate in the company growth (Dimson, Karakas, and Li, 2012; Deng, Kang,
and Low, 2013). Here is important to engage also the “Bottom of the Pyramid” (Prahalad, 2006) and, in particular, the Fringe stakeholders (Hart and Sharma, 2004) towards a stakeholder map which needs to be as inclusive
as possible.

 

CSR can be a
voluntary practice that comes from inside the company’s commitment towards
environmental, social and governance issues or simply from external
institutional regulatory decisions. As stated in Christopher Small’s “The Foundations of Corporate Social
Responsibility”, the best way to implement the CSR within a company is the
mix between self-CSR and external regulatory CSR; in other words, the
coexistence of hard law/soft law (regulation / self – regulation) is better
than just one of them since it provides, as observed, a positive impact in the
firm’s performance and in the society. However, given that CSR reflects
company’s identity and awareness towards its stakeholders, most of the firms
pretend to take care of it, leaving some hidden pitfalls behind the right use
of CSR. If the company pretends to be sustainable just
because it is written in the business model but its operations follow the
opposite direction, then the company is not responsible, thus not sustainable. It
is not always possible to adjust the environment in which the company operates,
others’ culture and behaviour towards it, but the company can always change
itself. As Eleaonor Roosvelt said, “In
the long run, we shape our lives, and we shape ourselves. The process never
ends until we die. And the choices we make are ultimately our own
responsibility”.

 

In the current
economic scenario where the survival of medium-small firms is more influenced
than ever by competitive performance, it seems that the CSR argument as a
guarantee of long-term growth is flawed because the size of the firm not always
allows her to implement its CSR and, nevertheless, regulatory policies imposed
by external institutions can damage its potential economic development. In this
case, the general driver of CSR is the corporate reputation (Villanova, 2008),
without a real internal understanding of the value of social responsible
behaviours in terms of mission, generation of new products and services and
risks. However, this approach does
not take into account every stakeholder (The bottom of Pyramid, for instance,
is rejected) but is merely concerned about their acceptance. On the other hand,
there are many past ethical theories and studies – Utilitarianism (Bentham,
1748), Deontological ethics (Kant, 1724-1804), Multiculturalism (Montaigne,1533-1592)
-, that give us frameworks on how to take the decisions in a business
environment and suggest that in front of the dilemma of ethical/unethical
choice businesses seem to maximize, with few exceptions, firms’ interests. Nonetheless,
there is another actor affected by firms’ decision, the society, and in the
long-term every company, no matter the industry in which operates, has to
satisfy the poorest socio-economic groups if it wants to be successful and get
customer loyalty (MacMillan, 2012).

According to the Dialogical ethics theory (Ju?rgen
Habermas and John Rawls, 1994), “the right decision is
the one that comes out as a result of the right procedure” and if a company wants to fulfill society’s needs, it has to build an
inclusive and healthy communication with every stakeholder. Here is possible to
assess whether the company possesses the value of responsibility. Responsibility is an immeasurable asset and only in the interaction with
innovation and competitiveness can be considered as a key-factor to ensure a
prosperous growth for the company. As far as I am concerned, responsibility is
a key driver of innovation and innovation is a key driver of sustainable
competitiveness, which, at the end, is easily measurable through KPIs.

 

Given the importance
of the interconnection among responsibility, innovation and competitiveness, it
is essential to understand the process that makes these three concepts so related
that they can determine the success of the company. If we look at the factors
used as management KPIs by the firms (session 9), we can clearly point out that
most of companies do not incorporate long-term vision and corporate culture
(and many other intangible assets) as relevant ones, even though they are the
drivers for sustainable long-term competitiveness. According to “The Business of Sustainability” report
published by The Boston Consulting Group in 2009, sustainability is “an integral part of value creation” although
most of the firms think of it mostly in environmental and regulatory terms. Long-term
vision and corporate culture are two main factors that assure coherence to the
company’s processes and shape its responsibility towards a sustainable growth. If
a company is aware (responsible) of the importance of being sustainable, when
an innovation process takes action (a new product or a new service is developed),
responsibility will determine whether the innovation will be in accordance to the
stakeholders’ needs, including the society. Responsibility for a company is
reflected into its proactive willingness of innovation: to render the business
sustainable it is fundamental to innovate, but innovation requires strong awareness
towards people’s beliefs, concerns and values in order to be successful. In
other terms, a real willingness of creating Corporate Shared Value (Porter
& Kramer, 2011). The assumption regarding this argument is that every
company, no matter the size, who disruptively wants to innovate its products,
its functions or its philosophy leaves its footprint in the employees and in
the society in which operates. Thus, when assessing the impact of every
innovation the company, instead of evaluating the trade-off between profit and
value for the society, should adopt a business framework in which every process
involves CSR before taking action.

 

One can argue that if
the company has to care about sustainability for every project, in the
short-term it lacks competitiveness as it has to spend too much time and money
into an intangible value like CSR
that can be easily put in the final report without any complaint from the
stakeholders. However, there are two major factors that need to be assessed:
first, a great company must have a long-term view of the business (Mckinsey,
2011); second, CSR is needed mainly to be competitive with other firms and not
just to be accepted by the stakeholders. Competitiveness is usually dictated by
company’s ability to innovate both the internal operations and the external
products and services, and to adopt an interfaith and multicultural dialogue with
every stakeholder. This, together with the responsibility towards the
environment, gives more importance to CSR and allows the company not only to
have a solid consensus about the decision-making process, but also to
understand what is the right innovation path to implement. When the company is
responsible in taking into account internal and external stakeholders, it
pushes the management to innovate in a sustainable way. This can be a key element to improve economic performance
and is far from being negligible in terms of competitiveness.

 

Times have changed and Friedman’s view of CSR3 does
not hold anymore. Overall, competitiveness, innovation and
responsibility give a tangible form to the CSR and drive businesses towards a
sustainable social and economic growth. This research insisted on a new organizational
approach, that is focused on wider integration and better involvement of all
the stakeholders, even those who are not necessarily part of the company’s
growth. From this point of view, CSR is a strong asset for the company that
guarantee the sustainability of the business.

 

 

 

 

 

 

 

 

REFERENCES

 

Arenas, D., Lozano, J.M., Villanova, M. (2008). Exploring
the Nature of the Relationship Between CSR and Competitiveness. Journal of Business Ethics. Retrieved April,
2008

 

Balagopal, B., Berns, M., Hopkins, M. Khayat,
Z., Kruschwitz, N., Towned, A. (2009). The Business of Sustainability. The Boston Consulting Group.

 

Bonini, S. (2011). The business of sustainability: McKinsey
Global Survey results. McKinsey
Global Institute. Retrieved October 2011 from:
https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/the-business-of-sustainability-mckinsey-global-survey-results.

 

Drucker, P., (2002). The Discipline of Innovation. Creating Shared Value. Harvard
Business Review.    Retrieved August,
2002.

 

Friedman, M. (1970)
The Social Responsibility of Business Is to Increase Its Profits. The New
York Times Magazine.

 

Handy C. What’s Business for? Harvard Business Review. Retrieved from March 2016

 

 Kruglianskas, M., Villanova, M. (2013).

Sustainability as Innovation Strategy: How Sustainability and Innovation Drive
Each Other and Company Competitiveness at Danone. Management Innovation Exchange. Retrieved from: http://www.managementexchange.com/story/sustainability-innovation-strategy-how-sustainability-and-innovation-drive-each-other-and-comp

 

Nidumolu, R.,
Prahalad, C. K., Rangaswami, M., & R. (2009, September 1). Why
Sustainability Is Now the Key Driver of Innovation. Harvard Business Review.

 

Porter, M. E., &
Kramer, M. R. (2011). Creating Shared Value. Harvard Business Review.

Retrieved January, 2011.

 

Small, C. (2014). The
Foundations of Corporate Social Responsibility. Harvard Business Review.

Retrieved February 19, 2014.

 

World Economic Forum.

(2017) Defining Sustainable Competitiveness. WEF report. Retrieved from: http://reports.weforum.org/global-competitiveness-report-2014-2015/defining-sustainable-competitiveness/?doing_wp_cron=1513441673.6177499294281005859375

 

 

 

 

 

 

 

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1 World Economic Forum. (2017) Defining Sustainable
Competitiveness. WEF report.

Retrieved from:

Defining Sustainable Competitiveness

 

2 Drucker,
P., (2002). The Discipline of
Innovation. Creating Shared Value. Harvard
Business Review. Retrieved August, 2002.

 

3 Friedman, M. (1970) The Social Responsibility of
Business Is to Increase Its Profits. The New York Times Magazine.

 

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