Proposition 5: When institutions internalize society, actions to produce societal value are undertaken

of Commerce as a slate of future-oriented issues that would help ensure India’s competitiveness.

Corporate diplomacy is particularly important where country interests differ or there is active conflict (or long historical mem- ories—for example, U.S.-headquartered companies in the Middle East or Japanese companies in China). Add to that challenge suspi- cion of foreigners and concerns about their hidden agendas. Lead- ers must find ways to show that they act or advise in the interests of society beyond politics as a company that is not tied to a specific government or interest group but serves humanity. If the values are real, then leaders are willing to invest in ways that reflect them not as a quid pro quo but as a sign that they will be locally involved. An Indian company entering Europe faced hostility from some govern- ment officials. Company leaders, who could draw from a long tradi- tion of social responsibility, chose to make community investments that heralded their high standards and leaders spoke with officials primarily about their values and how, once in a country, they would remain committed to its prosperity.

When leaders come to see themselves in terms of societal pur- pose, even across countries, they choose to perform institutional work, including self-initiated unofficial international diplomacy.

In May 2007, the chairman of IBM Greater China organized his own diplomatic mission to Washington DC, meeting with Sena- tors, Members of Congress and White House officials on both sides of the China issue to build bridges and find areas of collabo- ration such as environmental issues because of his conviction that his role in a global company gave him a unique perspective on both countries and a desire to see both thrive as allies.

3.1.5. Proposition 5: When institutions internalize society,

encourage people from one country to serve another. Articulating an institutional purpose broader then making money can guide strategies and actions, open new sources for innovation and help people express firm values and their own.²³

“Corporate citizenship” is a relatively new term to connote em- beddedness in society and the obligations that accrue.²⁴ It might encompass corporate philanthropy but ranges far beyond it into core business strategies and operations. For example, IBM’s ap- proach to corporate citizenship is closely connected to its busi- ness competence—to harness the power of technology-enabled innovation to meet social and educational goals of the broader society. IBM employees are expected to look at those broader goals while carrying out their particular tasks. A Latin American executive responsible for the small-and-mid-sized business sector felt that IBMers were increasingly using an external or societal lens to view IBM: “I see a change in the way we think about social responsibility. Twenty years ago, I think the focus was, do the right thing internally. Before, it’s like I see a problem in the society, in the community, and I don’t care because this is not inside IBM, so I have nothing to do with it. The change right now is to leverage the size of IBM and do the right thing outside our organization into the whole supply chain with providers and customers.”

Attention to social needs in particular places can generate ideas that lead to significant innovations. For Cemex, operating by this institutional logic and considering unmet societal needs produced innovations such as anti-bacterial concrete, which was particularly important for hospitals and farms; water-resistant con- crete helpful in flood-prone areas; or used tires converted to road surface for countries with rapid growth in road construction. An idea from Egypt for salt water-resistant concrete, helpful for har- bor and marine applications became a product launched in the Philippines.

23 For a distinct but related argument on the benefits of open innovation, see Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology (Boston: Harvard Business School Press, 2003).

24 For a general overview of the concept of corporate citizenship, see Andrew Crane, Dirk Matten, and Jeremy Moon, Corporations and Citizenship (Cambridge: Cam- bridge University Press, 2008).

Institution-building connects an extended family of partners across an ecosystem. Cemex started Construrama, a distribution program for small hardware stores in 2001 in response to compe- tition from Home Depot and Lowes, U.S. construction product companies that were then entering Latin America. Cemex drew on its values to seek dealers with integrity who were trusted in their communities; the company rejected high growth/high mar- gin candidates whose business tactics didn’t meet Cemex ethical standards. Construrama offers training, support, brand recogni- tion, and easy access to products for small hardware stores, includ- ing sometimes the first computers and Internet access for these small enterprises. By the mid 2000s this network in Mexico and Venezuela was the equivalent of the largest retail chain in Latin America and it was expanding to other developing countries.

Cemex owns the Construrama brand and handles promotion but doesn’t charge distributors, operate stores, or have decision- making authority, although service standards must be met. About a third of the Construrama management team at headquarters spends 6–8 months working at the stores. Partners participate in councils on a rotating basis. Among the Cemex values that are disseminated to partners is participation in community-building philanthropic endeavors, for example, contributing people and materials to expand an orphanage or improve a school. A Cemex executive referred to the societal sensitivity that produced Con- strurama as “understanding the last link in the value chain”.

Widespread opportunities for individuals to use company re- sources to serve society further institution-building goals. In 2003, when IBM’s business emphasis had shifted to On Demand Com- puting, the company launched On Demand Community, an in- tranet site for technology tools designed to improve schools and community organizations. Three years later, 75,000 employees (over 20% of the population) had performed nearly 3.5 million hours of service and the number continued to rise in subsequent years. IBMers could clock their community service time and at 50 hours get a certificate of recognition from their country head and be eligible to apply for a grant for that organization based on IBM worldwide standards. According to IBM officials, many people love the service for its own sake and forget to clock their hours.