Collaborative Value Creation

CVC Component 3: Partnership Processes

In this component we first examine the value creation processes involved in the partnership formation and selection phase and then analyze the subsequent implementation phase in terms of collaboration design, operations, and institutionalization. We employ the value terminology set forth in CVC Component 1: the value creation spectrum referring to the four sources of value (resource complementarity, resource nature, resource directionality and use, and linked interests) and the four types of value (associational, transferred resource, interaction, and synergistic), in order to make explicit the interrelationships across the components of the framework that provide the different windows for the analysis of the co-creation process. We will also refer to the collaboration Stages analyzed in CVC Component 2: philanthropic, transactional, integrative, transformational. As such, the application of the components suggest that greater value is created at all levels of analysis—micro, meso, and macro—as collaboration moves across the value creation spectrum from sole creation to co-creation of value.

Partnership Formation

Partnership formation (Selsky & Parker, 2005) is usually expressed in the literature as initial conditions (Bryson, Crosby, & Middleton Stone, 2006), problem-setting processes (Gray, 1989; McCann, 1983), coalition building (Waddock, 1989), and preconditions for partnerships (Waddell & Brown, 1997). Some scholars present formation as part of the partnership selection process (Gray, 1989; McCann, 1983; Waddock, 1989); hence the processes of formation and implementation appear to “overlap and interact” (McCann, 1983, p. 178); others suggest that partnership formation consists of a distinct phase or a set of preconditions (Seitanidi, Koufopoulos, & Palmer, 2010; Waddell & Brown, 1997) that occur prior to the partnership implementation. We propose that the selection stage is positioned in a grey area functioning as a bridge between partnership formation and implementation. Conceptually and analytically we follow Seitanidi et al. (2010) and Seitanidi and Crane (2009) by separating the two to analyze more systematically the determinants of the co-creation of value. As Vurron, Dacin, and Perrini (2010) remark, the time dimension in the analysis of cross-sector social partnerships (Selsky & Parker, 2005) is represented by studies that examine the static characteristics of partnerships (Bryson et al., 2006) and by process-based views (Seitanidi & Crane, 2009) that “extend the debate to the variety of managerial challenges and conditions affecting collaborations as they progress through stages” (Vurron et al., 2010, p. 41). Consequently, we focus first on the formation stage with particular emphasis on the initial assessment of the organizational fit potential, which is a fundamental determinant of the realization of value emerging from resource complementarity.

Formation can be seen as an early informal assessment mechanism that evaluates the suitability of a collaboration to evolve into an integrative or transformational relationship where the long-term value creation potential of the partnership for the partners and society is higher (Austin, 2000a). Underestimating the costs and negative effects of poor organizational pairing can be the result of insufficient experience in co-creation of value, planning, and preparation (Berger, Cunningham, & Drumwright, 2004; Jamali & Keshishian, 2009). Often managers “think about it,” but they do not usually invest “a huge amount of time in that process” (Austin, 2000a, p. 50). Such neglect carries consequences, as due diligence and relationship building are key process variables that can determine the fit between the partners. This process will increase managers’ ability to anticipate and capture the full potential for the partnership for both the business and the nonprofit partner. More importantly, the steps that we discuss below will provide early indications of the benefits that are likely to be produced by both partnering organizations collectively (Clarke & Fuller, 2010; Gourville & Rangan, 2004) indicating the co-creation of value and the potential to externalize the value to society. However, deciding which partner holds the highest potential for the production of synergistic value is time consuming and challenging.

Fit within a partnership refers to the degree the collaborating organizations can achieve congruence in their respective perceptions, interests, and strategic direction. As pointed out by Weiser, Kahane, Rochlin, and Landis (2006, p. 6) “The correct partnership is everything”; hence organizations should seek early indications of partnership compatibility. An important mechanism (Bryson et al., 2006) that offers an indication of value co-creation potential is the identification of linked interests expressed through the initial articulation of the social problem that affects both partners (Gray, 1989; Waddock, 1986). Hence, examining partners’ social problem frames reveals commonalities or differences on how they perceive the dimensions of a social problem (McCann, 1983). The process of articulation can identify incompatibilities signaling the need for either frame realignment or abandoning their collaborative efforts. This moves the concerns “beyond how the benefit pie is divided among the collaborators . . . to the potential of cross sector partnerships to be a significant transformative force in society” (Austin, 2010, p. 13). More important, moving to the societal level is encouraging the partners to look at the partnership’s “broader political implications” (Crane, 2010, p. 17), elevating social partnerships to global governance mechanisms (Crane, 2010). In effect, if the partners are able to link their interests, and also draw links with the broader societal betterment, it would provide an early indication of high potential for co-creation of value for the social good, that is, synergistic value capture at the societal level. The more the social problem is linked to the interests of the organizations the higher the potential to institutionalize the co-creation process within the organizations, which will lead to better value capture by the partners and intended or unintended beneficiaries (Le Ber & Branzei, 2010a).

Realizing the potential value creation from resource complementarity is dependent on achieving organizational compatibility. The difficulties in developing high-value integrative and transformational collaborations are extensively documented in the literature (Austin, 2000a; Berger et al., 2004; Bryson et al., 2006; Crane, 2010; Kolk, Van Tulder, & Kostwinder, 2008; Seitanidi & Ryan, 2007; Teegen, Doh, & Vachani, 2004). Differences in goals and characteristics (McFarlan, 1999), values, motives, and types of constituents (Alsop, 2004; Crane, 1998; Di Maggio & Anheier, 1990; Milne, Iyer, & Gooding-Williams, 1996), objectives, (Heap, 1998; Stafford & Hartman, 2001), missions (Shaffer & Hillman, 2000; Westley & Vedenburg, 1997), and organizational characteristics and structures (Berger et al., 2004) require early measures of fit that can provide indications for the potential of co-creation of value. Berger et al. suggest that many of the partnership problems, but not all, can be predictable and dealt with. Such problems include misunderstandings; misallocation of costs and benefits; mismatches of power; lack of complementary skills, resources, and effective decision-making styles; and mismatching of time scales and mistrust. They propose a useful set of nine measures of fit and compatibility that can assist the partners to assess the existing and potential degree of fit. We extend this fit framework by adding further measures of fit that contribute to the anticipation of problems while focusing on the maximization of the potential of the co-creation of value at the partnership formation stage.

The compatibilities and differences across the partners allow for diverse combinations of tangible and intangible resources into unique resource amalgamations that can benefit not only the partners in new ways but also externalize the socioeconomic innovation value produced for society. In order to assess the complementarity of the resources and their value creation potential it is important to recognize the nature of the resources that each partner has the potential to contribute, including tangible (money, land, facilities, machinery, supplies, structures, natural resources) and intangible resources (knowledge, capabilities, management practices, and skills). The more the partners are willing to deploy their distinctive organization-specific resources, the greater will be the potential for value creation. This value potential is also dependent on the directionality and use of the resource flow across the partners, that is, the extent the exchange of resources is unilateral, or bilateral and reciprocal, or a conjoined intermingling of the organization-specific and complementary resources. Unilateral flows or parallel exchanges can create value, but combining resources can co-create greater value. Potential partners’ resource availability and likely directionality of flows can be assessed if the organizations had previous interactions (Goffman, 1983) or information is available from collaborations with other partners (Seitanidi, 2010).

Examining the partners’ motivations can reveal linked interests by providing an early indication of partners’ intentions and expected benefits (Seitanidi, 2010), offering some evidence of the transformative intention of the partnership (Seitanidi et al., 2010). Due to the required time horizon (Austin, 2000a; Rondinelli & London, 2003) of such integrative and transformational relationships, it is useful to include in the formation analysis instances of previous value creation through the transfer of assets of what Gourville and Rangan (2004) label “first-order” (e.g., money) and subsequent resultant “second-order” associational or interaction value (e.g., improved employee morale, increased productivity, better motivated sales force). Linked to the motives, a particularly important measure to assess organizational compatibility is the mission fit, a key indicator of linked interests. When the mission of each organization is strongly aligned with the partnership (Berger et al., 2004; Gourville & Rangan, 2004) the relationship has more potential to be important to both organizations.

The previous experience of the partners (Hardy, Lawrence, & Phillips, 2006), including their unique organizational histories (Barnett, 2007) in developing value relationships, is an important determinant for the partnership fit indicating the ability of the partners to uncover novel capabilities and improve their prospects for social value creation (Brickson, 2007; Plowman, Baker, Kulkarni, Solansky, & Travis, 2007). This will indicate the degree of “structural embeddedness” (Bryson et al., 2006, p. 46), that is, how positively the partners have interacted in the past (Jones, Hesterly, & Borgatti, 1997; Ring & Van de Ven, 1994) in producing value. Therefore, the history of interactions indicates potential for moving toward integrative or transformative relations (Seitanidi et al., 2010).

One important motive for the formation of partnerships for both partners is to gain visibility (Gourville & Rangan, 2004) that may enhance reputation (Tully, 2004), public image (Alsop, 2004; Heap, 1998; Rodinelli & London, 2003), and public relations (Milne et al., 1996). Visibility contributes to social license to operate, access to local communities (Greenall & Rovere, 1999; Heap, 1998) for high-risk industries, credibility (Gourville & Rangan, 2004), and increased potential for funding (Heap, 1998; Seitanidi, 2010). In effect, positive visibility, a form of associational value, is a highly desired outcome for the partners, which we consider a fit measure that takes place either explicitly or implicitly during the formation phase. It is essential that both partners are comfortable with the potential benefits and costs of their partner’s visibility, which will contribute to the organizational fit and the potential for co-creation of value.

Finally, Rondinelli and London (2003) refer to the importance of identifying prepartnership champions, particularly senior executives with a long-term commitment who will play a key role in developing cross-functional teams within and across the partnership.

Figure 1 summarizes the measures of fit that were discussed above.

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Figure 1.

Partnership Formation: Organizational Fit

Partner Selection

The processes of selecting a partner build on and extend the previous assessment of partner fit potential carried out in the formation phase. Despite being a common reason for partnership failure, poor partner selection (Holmberg & Cummings, 2009) has received relatively limited attention even in the more advanced strategic alliances literature (Geringer, 1991). Selecting the most appropriate partner is a decision that, to a large extent, determines the value creation potential of the partnership.

Simonin (1997) refers to the “collaborative know-how,” encompassing “knowledge, skills and competences” (Draulans, deMan, & Volberda, 2003). It requires skills in searching and negotiating as well as terminating early low-potential relationships (Kumar & Nti, 1998). Partner selection might consist of a long or brief process (London & Rondinelli, 2003; Seitanidi, 2010). Inadequate attention to the selection of partners is associated with organizational inexperience (Harbison & Pekar, 1998), which can result in short-lived collaborations. The highest potential for partnership benefits is associated with long-term collaborations (Pangarkar, 2003). Thus, accurate value assessment potential is a predictor of partnership longevity.

Developing partnership-specific criteria facilitates the process of assessing potential partners; examples of selection criteria suggested in the literature include industry of interest, scope of operations, cost-effectiveness (investment required vs. generation of potential value), time scales of operation, personal affiliations, availability and type of resources (Holmberg & Cummings, 2009; Seitanidi, 2010; Seitanidi & Crane, 2009). One approach to systematize this process would be to specify criteria that would reveal how well the potential partnership could tap into each of the four sources of value, resource complementarity, resource nature, resource directionality and use, and linked interests and how that resource configuration would produce what mix of the four types of value, that is, associational, transferred, interaction, and synergistic.

Despite the important role of risk management in partnerships (Andrioff & Waddock, 2002; Bendell, 2000b; Heap, 1998, 2000; Le Ber & Branzei, 2010b; Selsky & Parker, 2005; Tully, 2004; Warner & Sullivan, 2004; Wymer & Samu, 2003), models of partnership implementation do not usually incorporate risk assessment (for exceptions, see Andrioff, 2000; Le Ber & Branzei, 2010b; Seitanidi, 2010; Seitanidi & Crane, 2009). The risk assessment would be a necessary process, particularly in the case of high adverse visibility (i.e., negative associational value) of one of the partners, due to exposure to public criticism or due to early termination of the partnership as a result of failure to adjust their value creation frames (Le Ber & Branzei, 2010c). The formal internal risk assessment process aims to collect interaction intelligence across the potential partner organizations (e.g., internal process and output reports, external assessment of previous collaborative projects). The formal external process aims to collect intelligence from previous partners in order to develop an awareness of any formal incidents that took place or any serious concerns that may be voiced by previous partner organizations. Moving to the informal risk assessment process, we follow the suggestions of Seitanidi and Crane (2009) consisting of open dialogue among the constituents of each partner organization (in the case of the nonprofit organization: employees, trustees, members of the board, beneficiaries) and informal meetings between the partners, particularly the potential members of the partnership teams. The informal external process consists of open dialogue of each partner with its peer organizations within their own sector and across other sectors to collect intelligence (e.g., anecdotal evidence) revealing accountable decision-making mechanisms (Hamman & Acutt, 2003). The partnership selection consists predominately of microprocesses (Seitanidi & Crane, 2009) that take place on the organizational level of each partner. Interactions across multiple stakeholder groups are encouraged as a way of managing power distribution, demonstrating that collaboration can be a different model of political behavior rather than being devoid of political dynamics (Gray, 1989; Seitanidi, 2010).

Figure 2 offers an overview of the process of partnership selection. We agree with the incorporation of feedback loops suggested by Clarke and Fuller (2010), which are particularly important in the role of the risk assessment informing the final options of potential partners.

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Figure 2.

Partnership Selection for Co-creation of Value      Adapted From Seitanidi and Crane (2009)

Partnership Implementation

Implementing the partnership is the value creation engine of cross-sector interactions where the value creation process can be either planned or emergent. The co-creation process not only requires the partners to have linked interests but also to be embedded in the local communities of beneficiaries and stakeholders in order to incorporate perceptions of value beyond the partnership dyad. This facilitates the value capture and diffusion on different levels. In order to examine the value creation processes in the implementation phase involving design and operations and partnership institutionalization, we employ the microstage model of Seitanidi and Crane (2009), which responded to previous calls (Clarke, 2007a, 2007b; Godfrey & Hatch, 2007; Waddock, 1989) for more studies on the processes of interactions required, in order to deepen our understanding. The model moves beyond the chronological progression models that define broad stages (Berger et al., 2004; Bryson et al., 2006; Googins & Rochlin, 2000; McCann, 1983; Westley & Vredenburg, 1997; Wilson & Charlton, 1997) to a process-based dynamic view (Vurron et al., 2010), introducing microprocesses as a way of overcoming implementation difficulties (Pressman & Wildavsky, 1973) and demonstrating the quality of partnering. The model focuses only on the implementation of partnerships rather than incorporating outcomes as part of the examination of partnership processes (Clarke & Fuller, 2010; Dalal-Clayton & Bass, 2002; Hood, Logsdon, & Thompson, 1993). We extend the model of Seitanidi and Crane by discussing how the dynamics between the partners can facilitate the co-creation of social, environmental, and economic value. Responding to the call of Clarke and Fuller (2010), we further indicate the two levels of implementation (organizational and collaborative).

Partnership Design and Operations

Partnership design and operations encompass formal processes that influence the implementation leading to outcomes. The literature has pointed to several design parameters and operating actions that contribute to partnering effectiveness. In social partnerships, Austin, Leonard, Reficco, and Wei-Skillern (2006) suggested that social value is created by missions and design. Partnership design includes the experimentation with the procedural and substantive partnership processes (Gray, 1989) such as: setting objectives and structural specifications (Andreasen, 1996; Arya & Salk, 2006; Austin, 2000b; Bryson et al., 2006; Glasbergen, 2007; Googins & Rochlin, 2000; Halal, 2001); formulating rules and regulations (Das & Teng, 1998; Gray, 1989); drafting a memorandum of understanding (Seitanidi & Crane, 2009); establishing leadership positions (Austin, 2000a; Waddock, 1986); deciding organizational structures (Berger et al., 2004; McCann, 1983); agreeing on the partnership management (Austin & Reavis, 2002; Seitanidi & Crane, 2009).

The above processes add structural and purpose congruency (Andreasen, 1996), which contributes to organizational compatibility and generates interaction value. They take place individually and jointly by the partners (Bowen, Newenham-Kahindi, & Herremans, 2010; Bryson et al., 2006; Clarke & Fuller, 2010). Coordination is required to codesign mechanisms that will collectively add value to the partnership (Brinkerhoff, 2002; Bryson et al., 2006; Milne et al., 1996; Seitanidi, 2008; Selsky & Parker, 2005). Value creation requires and produces the valuable intangibles through the processes of working together. Decisions gradually reach operationalization, structures form, passing through several adaptations due to internal or external factors (Austin, 2000a; Gray, 1989), leading to stabilization of partnership content, processes, and structures (Seitanidi & Crane, 2009) until the next cycle of iteration.

Recent literature on social partnerships presented factors that determine the social change potential within the partnership relationship. Seitanidi (2008) suggested that partners are required to embrace their adaptive responsibilities allowing them to move away from their limiting predefined roles and transcend beyond a single dimension of responsibility to offer solutions to problems that require fundamental change. The above confirms our assertion that the company’s CSR and perception of its responsibilities need to evolve to higher levels to coproduce synergistic value. Similarly, Le Ber and Branzei (2010b) proposed that deliberate role recalibration can tighten the coupling between social value creation and risk. As such, the above research stresses the need for change within the partnership facilitated by the partners’ linked interests to contribute to the potential for change outside the relationship, for example, moving the relationship to the transformational stage.

The above processes constitute forms of formal control mechanisms in collaboration (Das & Teng, 1998) that are generally introduced during early stages and play an important role in developing familiarity across the organizations. However, informal measures are more likely to be effective in dealing with tensions around indeterminacy, vagueness, balancing the interpretations between the partners (Ben, 2007; Orlitzky, Schmidt, & Rynes, 2003), and uncertainty (Waddock, 1991) by exerting symbolic power that can influence individual organizations and industry macroculture (Harris & Crane, 2002). Informal measures of control such as trust-based governance may play an important role in nonprofit–business partnerships (Rivera-Santos & Rufin, 2010a) in determining the alliance viability (Arya & Salk, 2006) and co-creation of value. These include: managing alliance culture to blend and harmonize two different organizational cultures (Wilkof, Brown, & Selsky, 1995); charismatic leadership inspiring employee participation (Andreasen, 1996; Berger et al., 2004; Bhattacharya, Sen, & Korschun, 2008); forms of communication that enable formation of trust (Austin, 2000a; Googins & Rochlin, 2000), mutual respect, openness, and constructive criticism to both external and internal audiences (Austin, 2000a); continual learning (Austin, 2000a; Bowen et al., 2010; London & Rondinelli, 2003; Senge, Dow, & Neath, 2006); managing conflict (Covey & Brown, 2001; Gray, 1989; Seitanidi, 2010), and encouraging open dialogue (Elkington & Fennell, 1998).

The above produce interaction value and also serve as enablers and preservers of value. Among the intangible resources that are produced are trust, relational capital, learning, knowledge, joint problem solving, contributing to the co-creation of value, thereby generating benefits for partners, individuals, and society.

Figure 3 below summarizes the partnership design and operations that set up the structures and processes generating value. This is the first instance that partners identify their value distance between their resources, goals, perceptions, and capabilities. The partnership design may be the end if the partners realize that their value distance is too great. The double arrows in Figure 3 demonstrate feedback loops across processes that lead to redesign and adaptations.

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Figure 3.

Partnership Design and Operations

Partnership Institutionalization

A partnership has reached institutionalization when its structures, processes, and programs are accepted by the partner organizations (Seitanidi & Crane, 2009) and their constituents and are embedded within the existing strategy, values, structures, and administrative systems of the organizations. Organizational and personal familiarization solidifies the partnership relationship within and between both organizations and enables it to survive the exit of key leaders on both sides.

One of the important institutionalization processes is interaction value accumulation that iteratively builds from information to knowledge to capabilities. This has been an implicit process emerging from our examination of various nonprofit–business partnership cases. Below we suggest explicitly how information transforms to capability as a result of the partners’ interactions and as such contribute a new process in the literature that focuses on partnership implementation. During the formation, selection, and the early design of the partnership the partners have originally only information about each other. The basic information about the key product/service proposition gradually increases, first within the members of the partnership team and later it diffuses within other departments of the organization; the intensification of interactions gradually transforms the information to knowledge. The explicit knowledge grows and the interactions increase familiarity, incorporating tacit knowledge about each other. This knowledge, together with positive informal conditions, lock in the emotional engagement of partners; hence a higher level of knowledge is integrated with enthusiasm, pride, trust, and with the explicit aim to share the unique resources of the organizations. As the partnership progresses the knowledge about the partner organization, its resources and use of resources becomes deeper and turns into a capability; that is, at this stage the partner is able to apply the knowledge in the contexts of both organizations. The partners are able to speak the “same language” and embark in co-creation that may produce innovative products, services, and skills. This is a manifestation of the iterative and accumulating generation of interaction value that can also progress to synergistic value.

If partners are to co-create social, environmental, and economic value, adjustment of their value frames is required to reach frame convergence (Noy, 2009) or frame fusion (Le Ber & Branzei, 2010b). Frame fusion is defined as “the construction of a new prognostic frame that motivates and disciplines partners’ cross sector interactions while preserving their distinct contribution to value creation” by retaining the identity and differences of each partner ¹ (Le Ber & Branzei, 2010b, p. 164). Value frame fusion assists in overcoming the partners’ disagreements and allows for transformation of the “current means into co-created goals with others who commit to building a possible future” (Dew, Read, Sarasvathy, & Wiltbank, 2008, p. 983). The above process takes place by each partner perceiving the strategic direction of the other’s decisions (Kaplan, 2008), observing organizational change processes (Balogun & Johnson, 2004), participating in multiplayer interaction (Croteau & Hicks, 2003; Kaplan & Murray, 2008), and monitoring and interpreting each other’s frames (Le Ber & Branzei, 2010c). Value frame fusion plays an important role in the alignment of perceptions and the creation of a mutual language by developing a vocabulary of meaning (Crane, 1998) and is likely to take place within the advanced integrative or transformational relationship stages. Stafford, Polonsky, and Hartman (2000, p. 122) provide evidence on how the partners align their socioeconomic value frames to co-create “entrepreneurial innovations that address environmental problems and result in operational efficiencies, new technologies and marketable ‘green’ products.” They demonstrate that partners may consciously decide to embark onto a transformational collaboration (Stafford & Hartman, 2001); however, we assume that in most cases the social change or social innovation potential emerges within the process (Austin, 2000a; London & Rondinelli, 2003).

If frame fusion is not successful, then frame divergence will shape the degree to which the organization will pursue its strategy and to what extent change will be created (Kaplan, 2008). In fact, “it is the interactions of individuals in the form of framing contests” that shape the outcomes (Kaplan, 2008, p. 744). The plurality of frames and the existence of conflict (Glynn, 2000; Gray, 1989) within a partnership allow for divergent frames that can consist of opportunities for co-creation. Particularly novel tasks (Heap, 2000; Le Ber & Branzei, 2010c; Seitanidi, 2010) allow for balancing potential bias associated with power dynamics (Bendell & Lake, 2000; Crane, 2000; Hamman & Acutt, 2003; Millar, Choi, & Chen, 2004; Tully, 2004; Utting, 2005). Adaptations are essential for survival (Kaplan, 2008) and present opportunities on the individual, organizational, and sectoral levels (Seitanidi & Lindgreen, 2010) to unlearn and (re)learn how to frame and act collectively to develop a synergistic framework, which is essential for providing solutions to social problems. The value capture will depend on the linked interests of the partners that will influence the level of institutionalization of the co-creation of value (Le Ber & Branzei, 2010a).

The institutionalization process enters a point of emerged collective meaning between the partner organizations, which require a reinstitutionalization of partnership processes, structures, and programs after each cycle of co-creation of value. When the partners have captured either unilaterally or jointly (Le Ber & Branzei, 2010a; Makadok, 2001) some value, a necessary prerequisite for continuing, they are ready for the next iteration of co-creation of value, including synergistic value arising from further innovation.

Partnerships are still faced with concerns, including issues of accountability (Reed & Reed, 2009), appropriateness of the standards developed, effectiveness and enforceability of mechanisms, decision-making differences, and control (Brown, 1991). Hence, calls for shared (Ashman, 2000; Austin, 2000a), consensus (Elbers, 2004) decision making and coregulation (Utting, 2005) have been suggested to balance the power dynamics across the partners (Seitanidi & Ryan, 2007). Decentralized control by allowing multiple stakeholders to voice concerns, incorporating feedback loops (Clarke & Fuller, 2010), and decentralized social accountability checkpoints, inviting suggestions from the ground to facilitate answerability, enforceability, and universality (Newell, 2002; Utting, 2005) can address previous criticisms.

In effect, the co-creation of social, environmental, and economic value, particularly as one moves into a transformational stage, would be the result of a highly engaged, decentralized community of voices allowing for the diffusion of outcomes pointing toward a participative, network perspective (Collier & Esteban, 1999; Heuer, 2011). This could include engagement with fringe stakeholders as a means to achieve creative destruction and innovation for the partners and society (Gray, 1989; Murphy & Arenas, 2010). The above expands prioritization of a few stakeholders to the engagement of many stakeholders associated directly or indirectly with partners.

Social betterment becomes central in the integrative and transformational stages of collaboration; hence, multiple stakeholders become a key component in the co-creation process and in reshaping the dialogue (Barrett, Austin, & McCarthy, 2002; Cornelious & Wallace, 2010; Fiol, Pratt, & O’ Connor, 2009; Israel, Schulz, Parker, & Becker, 1998), allowing for value capture on multiple levels. Embedding the partnership across interested communities introduces a new layer of partnership institutionalization outside the dyad of the profit and nonprofit organizations.

Figure 4 below presents the partnership institutionalization process commencing by embedding the partnership within each organization, reaching value frame fusion, including reinstitutionalization of partnership processes, structures, and programs based on newly emerged shared perceptions. There is an inner circle of iterative process change to develop new capabilities, value propositions, and frame fusion. Institutional viability and expanding value co-creation also requires ongoing inputs from outside stakeholders. Partnerships have the potential to deliver several cycles of value creation or may end unexpectedly depending on: the quality of the processes; the evolution of the partners’ interests, capabilities, and relationships; and changes in the environment.

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Figure 4.

Partnership Institutionalization

Partnering Processes Case Illustration

We present an illustration of the above partnering processes based on the descriptions and analyses of Austin and Reavis (2002) and London and Rondinelli (2003) of a multiyear collaboration between Starbucks and Conservation International (CI), perceived by both partners as very successful. The partnering centered initially on assisting small coffee growers in southern Mexico to improve their environmental practices and quality of coffee.

CVC Component 4: Collaboration Outcomes

We are experiencing an unprecedented proliferation of “accelerated interdependence” (Austin, 2000b, p. 69) across the public, profit, and nonprofit sectors due to the double devolution in functions, from central governments to the local authorities, and in sectors, from the public to the private and nonprofit (Austin, 2000b). The increasing fiscal needs of the public and nonprofit sectors contribute to the diffusion of responsibilities promoting cross-sector collaboration as an effective and efficient approach to manage assets and provide solutions to social problems (Austin, 2000b). However, the intense needs for resources can capture and perhaps divert the critical role of the state and, in some cases, of the nonprofit sector (Bendell, 2000a, 2000b; Mitchell, 1998; Ndegwa, 1996; Raftopoulos, 2000; Seitanidi, 2010). Hence, criticism toward partnerships (Biermann, Chan, Mert, & Pattberg, 2007; Hartwich, Gonzalez, & Vieira, 2005; Reed & Reed, 2009) and the outcomes achieved (Austin, 2010; Brinkerhoff, 2007; Seitanidi, 2010) is not a surprise, but rather a call for a paradigm change. The examination of nonprofit–business partnership outcomes (Selsky & Parker, 2005) is an evolving area in practice and research, particularly when the focus is not only on the benefits for the partners but also for the society (Austin, 2000, 2010; Margolis & Walsh, 2003; Seitanidi, 2010). Although what makes collaboration possible is “the need and the potential” for benefit (Wood & Gray, 1991, p. 161) given that social partnerships aim to address social issues (Waddock, 1988), the definition of what constitutes positive partnership outcomes “should encompass the social value generated by the collaboration” (Austin, 2000b, p. 77) on different levels of analysis (Seitanidi, 2008, 2010).

The shift in the literature from social partnerships (Waddock, 1988) to strategic partnerships (Andrioff, 2000; Birch, 2003; Elkington & Fennell, 2000; Warner & Sullivan, 2004) is turning full circle as new found significance is assigned to collective impact (Kania & Krammer, 2010), social value measurement (Mulgan, 2010), and the very recent creation of a new class of assets, named by JP Morgan and the Rockefeller Foundation, ‘impact investment’ that aims to “create positive impact beyond the financial return” (O’Donohoe, Leijonhufvud, Saltuk, Bugg-Levine, & Brandeburg, 2010, p. 5). The Monitor Institute (2009, p. 9) estimates that social impact investing will reach US$500 billion over the next decade.

Reconfiguring the meaning of financial value by incorporating social and environmental value is of critical importance (O’Donohoe, Leijonhufvud, Saltuk, Bugg-Levine, & Brandeburg, 2010, p. 7). The reconstitution of value creates a unique opportunity for intentional social change mechanisms to provide opportunities for social and environmental impact as forms of superior value creation for economic and social returns, not only for few but for many, what Porter and Kramer refer to as “shared value” (Porter & Kramer, 2011). To assess whether nonprofit–business partnerships constitute such intentional mechanisms for social change and innovation, we need to move forward by locating where value is created, that is, loci ² of value creation.

Where Value Is Created: Loci of Value Creation

In our (Austin & Seitanidi, 2012) definition of collaborative value 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” the locational dimension is central. The CVC framework incorporates multilevel value assessment by introducing three levels of analysis: meso, micro, and macro. The focus in this element of the framework is on who benefits from the collaboration. Collaborations generate value, often simultaneously, at these multiple levels. For our purpose of examining value, we distinguish two loci: within the collaboration and external to it. Internally, we examine value accruing at the meso level for the partnering organizations and at the micro level for the individuals within those organizations. Externally, we focus on societal welfare and its improvement as a result of the collaboration in the form of benefits at the micro (to individual recipients), meso (other organizations), and macro (systemic changes) levels.

Internal Value Creation

Micro level

Collaborations can produce benefits within the partnering organizations for individuals. This value can be two fold: instrumental and psychological. For example, instrumental benefits can include new or strengthened managerial skills, leadership opportunities, technical and sector knowledge, broadened perspectives; emotional benefits encompass the individual’s psychic satisfaction from contributing to social betterment and developing new friendships with colleagues from the partner organization. The micro-level benefits are largely underexplored in the literature despite the broad acceptance that implementing CSR programs should benefit a wide range of stakeholders beyond the partner organizations (Bhattacharya & Sen, 2004; Green & Peloza, 2011; Vock et al., 2011). In a recent study Vock et al. (2011) argue that the participation of employees in partnerships can affect consumers either favorably or unfavorably.

Bhattacharya et al. reported that a company’s involvement in CSR programs can satisfy several psychological needs, including personal growth, the employees’ own sense of responsibility for the community and reduction in levels of stress; the precondition is that employees should get involved in the relevant programs. More instrumental benefits comprise the development of new skills, building a connection between the company and the employee, particularly when there are feelings of isolation due to physical distance between the employee and the central office; potential career advancement (Burchell & Cook, 2011); and using the resultant positive reputation as a “shield” for the employee when local populations are negative toward the company (Bhattacharya et al., 2008). Similar psychological mechanisms associated with the enthusiasm of employees have the potential to cause spillover effects, triggering favorable customer reactions (Kolk, Van Dolen, & Vock, 2010). Employee volunteering, an important component of transactional partnerships (Austin, 2000a; Austin & Seitanidi, 2012), may improve the work motivation and job performance (Bartel, 2001; Jones, 2007), customer orientation, and productivity, and in effect, benefit consumers (Vock et al., 2011).

The partnership literature makes extensive reference to the partnership outcomes, concentrating more on the benefits rather than on the costs, that contribute to the value creation internally, either for the profit or the nonprofit partners as demonstrated above. However, there is a notable lack of systematic in-depth analysis of outcomes beyond the descriptive level; in effect, the full appreciation of the benefits and costs remains relatively unexplored. The majority of the literature discusses outcomes as part of a partnership conceptual framework or by reporting outcomes as one of the partnership findings. A limited number of studies are available on addressing outcomes as a focal issue and offering an outcomes-centered conceptualization (Austin & Reavis, 2002; Hardy et al., 2003; Seitanidi, 2010). A precondition to address the above deficiency is to study the links across levels and loci of benefits. As Bhattacharya, Korschun, and Sen (2009) remark, to understand the full impact of CSR initiatives we first need to understand how CSR can benefit individual stakeholders. Similarly, Waddock (2010) refers to the individual level of analysis as the “difference makers” comprising the fundamental element for the development of institutional pressures. Hence, either the effects of initiatives on individuals or the role of individuals in affecting value creation require further analysis on the micro level.

Table 1 presents the categorization of benefits on different levels of analysis and according to the loci of value. Understanding the links across the different levels of value creation and value capture is challenging. Interestingly, the most recent research on the micro level of analysis is leading in capturing the interaction level across the internal/external dimension (employees/customers) of benefits (Kolk et al., 2010; Vock et al., 2011). The conceptualization of the links between employees and customers herald a new research domain that captures the missing links of cause and effect in partnerships either directly or indirectly and focuses on interaction as a level of analysis. In Table 1 value creation is divided also according to the types of value generated and it provides examples of benefits and costs as evidenced by the literature. As such it provides a time and value dimension in the categorization.

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Table 1.

Loci of Value Creation: Partnership Outcome per Level of Analysis

Partnership Outcomes
Levels of Outcomes	Benefits	Costs
Internal to the partnership
Meso: Organizational
Nonprofit organization	Associational value: Credibility and visibility, increased public awareness, increase in support for organizational mission.	Increased management costs, decrease in donations; decrease in potential donations due to the high visibility of wealthy partner; increased needs for resource allocation; increased need in skills; decrease in volunteer support; decrease in trustee support; public criticism; decrease in support from other nonprofit organizations; media criticism; decrease in employee productivity; decreased support from volunteers; decreased credibility; decreased reputation; internal and external skepticism; increased costs due to unforeseen exit of a partner from partnership; effectiveness and enforceability of the developed mechanisms; legitimizing mechanism of “greenwashing”
	Transferred asset value: Financial support in cash or in kind; land, materials; increase of cash donations, of money, land, material from partner or others due to higher visibility; additional financial support; volunteer capital
	Interaction value: Opportunities for learning, development of unique capabilities, access to networks, technical expertise, increased ability to change behavior, improved relations with profit sector, exposure to different organizational culture, market intelligence
	Synergistic value: Opportunities for innovation, opportunities for improvement of processes, development of new partnerships increase in performance, sharing leadership, increased long-term value potential, increased ability to change behavior, exert more political power within sector and society
Micro: Individual
Nonprofit (individuals internal to the partnership)	Instrumental: New strengthened managerial skills, leadership opportunities, technical and sector knowledge, broadened perspectives
	Psychological: New friendships
Business (organizational)	Associational value: Credibility, brand reputation, increased sales, legitimacy, increased usage of products/services, improved media exposure, public support, increased stakeholder loyalty, stakeholder communication	Increased management costs, increased costs for the development of new markets and new products, increased need in resource allocation, increased need in skills, increased risk of losing exclusivity in social innovation, internal and external skepticism, potential for reduced competitiveness due to open access innovation, increased credibility costs in case of unforeseen exit of a partner from partnership
	Transferred asset value: Acquire market intelligence, competitiveness, second-generation customers, strengthened CFP
	Interaction value: Access to networks, technical expertise, improved community and government relations, decreased long- and short-term costs, speeding up approval for license to operate, exposure to different organizational culture, increased potential meeting government’s and society’s priorities, exert more political power within nonprofit sector, improved accountability
	Employee-specific benefits: Unique capabilities, increased employee morale, productivity, reduced recruitment and retention costs; lower absenteeism; motivated sales force; higher-quality products
	Investor-specific benefits: Increased allegiance, investor recruitment fit
	Customer-specific benefits: Reduced importance of price in the process of choice and reduced asymmetry between consumers and business
	Synergistic value: Product and process innovation and learning, increased risk management skills, opportunities for innovation, opportunities for improvement of processes, development of unique capabilities, adaptation of new management practices due to the interaction with nonprofit organizations (increased long-term value potential), exert more political power within sector and society
Business (individuals internal to the partnership)	Instrumental: New strengthened managerial skills, leadership opportunities, technical and sector knowledge, broadened perspectives	Confusion; demotivation; diminishing trust due to miss-matches of missions, goals, strategies, value frames; feeling of selling out; potential accountability problems to the beneficiaries
	Psychological: Psychic satisfaction (self-actualization), and new friendships
External to the partnership
Macro: Societal
Individuals (external to the partnership, intended and unintended)	Increased disease/illness awareness and prevention, reduced death rates, increased life expectancy, reduced substance abuse, improved health, improved well-being, improved social inclusion, improved independence and responsibility, reduced asymmetry between consumers and business, improved literacy, increased disposable income	Potential accountability, credibility, and implementation problems
Other organizations	Adoption of technological advantage through available open innovation/intellectual property, adoption of social innovations, improved standards, reduced social costs, increased profit margin, increased long-term value potential, increased potential to meet government’s and society’s priorities, development of new markets	Costs for the development of new markets, appropriateness of the standards developed
Society (including outcomes to the environment)	Decreased pollution, deaths; increased recycling, improved adoption rates of new practices; improved environmental standards; improved global governance mechanisms; reduced social costs; increased capacity of societies to create social well-being; increased values; increased long-term value potential; improved social standards; enabling societies to take charge of their own needs, interacting with government and jointly designing welfare provision	Decrease in the credibility of the institution of partnership to deliver in case of rhetorical claims, increase in cynicism, potential decrease in institutional trust in business and nonprofit organizations, diluting ethical and emotional dimensions of social problems and replacing with instrumental perceptions, appropriateness of the standards developed
Systemic changes	Introduction and adoption of new technology by industries, reduced social costs through interaction effects of social problems, improved cross-sector relations, increased global value, improved health, improved well-being, improved social inclusion, improved independence and responsibility	Decrease of trust across sectors in case of miss-matched partners, negative publicity, and inability to deliver

Note. CFE: corporate financial performance.

External Value Creation

Partnering Value Creation Case Illustration

We return briefly to the partnership between Starbucks and Conservation International to illustrate some of the above-mentioned types and levels of value creation outcomes. Although associational value was not a primary objective or motivator for either partner, it was generated nevertheless. The project’s first shipment of shade-grown coffee attracted major press coverage due to its novelty resulting in 45 million free news impressions, thereby giving positive visibility to both partners and their relationship. This produced internal value at the meso level, but it also has external value at the societal level, as it creates awareness of a desirable innovation and perhaps stimulates imitation. Transferred value was more important to the partners. Although there was a philanthropic component, more valuable was the deployment of their distinctive assets. By combining their environmental and market knowledge and systems, the partners were able to change the supply system in ways that they could not have done either alone or in parallel. This gave rise to synergistic value in which social and environmental benefits produced economic value in the form of higher-value coffee and higher farmer prices. This, in turn, motivated and enabled the continuation of the conservation practices and environmental benefits, thereby stimulating a virtuous value creation circle.

At the micro level, the farmers were benefitted by income increases of 40% with the resultant social betterment of their families and communities. At the meso level, the farmer cooperatives were strengthened organizationally and economically as export sales rose 100%. Starbucks benefitted financially from achieving a new quality supply source and a distinctive addition to its product line, also a benefit to its customers. The farmers’ environmental knowledge and technical capabilities were increased and the natural habitat conserved. CI was able to contribute to its conservation goals and to societal benefit, by preserving the habitat surrounding the major biosphere reserve adjacent to the coffee producers. Both partnering organizations and their members were enriched by the interaction value in the form of intangibles such as learning, new knowledge, relational capital, trust, teamwork skills, and motivation. Those intangibles, increasing and accumulating over time, enabled the partners to undertake the more ambitious task of creating new purchasing guidelines by involving a broader set of stakeholders and moving toward the co-creation of a larger, industry-wide impact with potentially greater value creation at all levels internally and externally. Furthermore, the partners replicated and expanded their collaboration into Central and South America.

For Practitioners

Galbreath suggested that what constitutes value and what the rules of value creation are is one of the most far-reaching changes in the 21st century: “what becomes easily apparent is that the firm’s success is ultimately derived from relationships, both internal and external” (Galbreath, 2002, p. 11), with cross-sector social partnerships constituting a central mechanism for value creation. Large and varied amounts of resources are required for the generation of value in multiple combinations for the production of economic, social, and environmental value. The CVC framework can assist practitioners manage the value creation variable by guiding deeper and systematic analyses of the following core questions: (a) What and where are the sources of value? (b) How and in what mix can these sources be most effectively tapped in each partnering phase: formation, selection, implementation, and outcomes? (c) How can different partnering processes affect differentially value creation across different collaboration relationships: philanthropic, transactional, integrative, transformational? What value outcomes are being produced by the collaboration for which organizations, individuals within and outside of the partnership, and for society in general? (d) What value outcomes are being produced by the collaboration for which organizations, individuwithin and outside of the partnership, and for society in general?

For Researchers

Collaborations do not always produce value as sometimes partners may reach bad solutions, create new problems, or not solve the target problems (Bryson et al., 2006; Austin, 2000a). The partnership literature is in the early stages of addressing issues of mapping the value creation road on different levels of analysis. Some macro-level benefits and costs require longitudinal studies by groups of researchers collaborating across interrelated fields across multiple organizations in order to capture how a direct social benefit has long term economic and social effects across organizations. Such research teams are just emerging as policy makers have only recently demonstrated an interest in capturing such impacts (ESRC, 2011). Furthermore, multilevel value assessment, that is, introducing all three levels of analysis: organizational, individual, and societal is a recent focus in the literature (Seitanidi, 2008, 2010; Seitanidi & Lindgreen, 2010). Examples include the study of the impact of social regeneration through partnership in disadvantaged communities (Cornelious & Wallace, 2010); studying the orchestration of multilevel coordination that shapes relational processes of frame fusion in the process of value creation (Le Ber & Branzei, 2010c); and addressing the reciprocal multilevel of change through the interplay between micro, meso, and macro levels of reality in the stage of partnership formation (Seitanidi et al., 2010). The empirical studies that aim to capture societal or systemic benefits (Seitanidi, 2010) tend to employ the perceptions of organizational actors in the focal organizations without involving beneficiary voices, or if they make reference to the beneficiaries, they generally employ a theoretical perspective (Le Ber & Branzei, 2010a). Overcoming the existing limitations of research that focus on single organizations requires a shift in focus, means, and methods. Such changes will allows us to capture the interconnections of cross-sector social interactions on multiple levels and possibly unlock the secrets to the ability of our societies to achieve positive social change intentionally in a short period of time.

Just as we provided at the end of the Part 1 article for Components 1 and 2, Table 2 provides sets of research avenues for the Components 3 and 4 of the CVC framework.

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Table 2.

Research Avenues by Collaborative Value Creation Component

Collaborative Value Creation Components	Research Avenues
Component 3: Partnering processes	How can partners maximize their partnership fit potential?
	How do partners articulate social problems and how do they develop frames that connect them with their interests and the social good?
	Do partners’ motives link with their partnership strategies? How can we examine systematically the history of the partners’ interactions in time?
	What is the role of partnership champions before and during the partnership?
	Should partners reconcile their value frames, to what extent and how?
	How can partnership process increase the potential for co-creation of synergistic value?
	How can partnerships strengthen their accountability through their processes mechanisms?
	How can partnership processes enhance societal outcomes?
	How can the processes in partnerships facilitate the development of new capabilities and skills?
	How can processes in partnerships facilitate value renewal?
	How can evaluation of the partnership implementation strengthen the value creation process?
	How can the evaluation of partnership implementation improve the benefits for both partners and also for society?
Component 4: Partnering outcomes	How do partners view their own and each other’s benefits and costs from the collaboration?
	How is social value generated as a result of the partnership outcomes?
	Do partnerships constitute intentional social change mechanisms? And how?
	How do the loci of value creation in partnerships interact?
	Are the multiple levels of value creation interdependent and what are the links between the micro, meso, and macro levels?
	What is the relationship between benefits and costs in partnerships?
	What are the links between the social and economic value creation and the different types of benefits and costs in partnerships?
	What are the partnership benefits and the costs for the stakeholders? And the beneficiaries of partnerships? How can we conceptualize the links between the benefits and costs in cross-sector social partnerships?
	How does external value created in partnerships contribute to the socioeconomic value creation for the partners?
	How do partnerships’ direct and indirect benefits link to the different levels of value creation (macro-meso-micro)?
	What is the role of vision in producing socioeconomic value in partnerships?
	How can the different types of value be assessed in partnerships?
	How can we develop a systematic and transparent value assessment in partnerships?
	How can assessment in partnerships strengthen decision making?
	How can indicators of value assessment in partnerships account for the different levels of value creation?
	How can we connect the different points of evaluation in partnerships (process outcomes and program outcomes and impact) to strengthen value creation on different levels?
	How can we assess the long-term impact of partnerships? Which are the most appropriate methods to assess impact? To what extent do partnerships deliver synergistic impacts? For whom? And how?
Overarching themes across components	How and to what extent does economic value create social and environmental value and vice versa?
	Is social, environmental, and economic value being created simultaneously or sequentially?
	Can we invent a new measure that assess multidimensional (economic-social-environmental) and multilevel (macro-meso-micro) value?
	How do partnerships reconstitute value?
	How can partnerships function as global mechanisms of societal governance?

What partners do and how they implement partnerships will have a significant impact on the micro, meso, and macro levels whether or not partners are considering co-creation of value explicitly or implicitly during the partnership processes. Furthermore, there is a need to demonstrate how and to what extent social and environmental value creates economic value and vice versa, whether simultaneously or sequentially. Understanding more deeply this virtuous value circle is at the heart of the paradigm change. As for any theoretical construct, we expect and hope that for the CVC conceptual and analytical framework researchers and practitioners will apply, test, refine, and expand it.

The starting premise for our framework was that co-creating value is the fundamental purpose of cross-sector collaboration. The aim of the CVC framework is to improve our understanding of the value creation spectrum, collaboration stages, partnering processes, and outcomes on multilevels and multidimensions of analysis to facilitate systematic thinking of partnerships as internal and external value creation mechanisms. As such our ending and enduring aspiration remains that every collaboration scholar and practitioner should strive to have their research or actions create significant value for society, organizations, and individuals.