Strategic Responses to Grand Challenges: Why and How Corporations Build Community Resilience

Management scholars have called for increased attention to how organisations respond to “grand challenges” (Ferraro et al. 2015; George et al. 2016). Despite significant prior scholarly work on corporate social and ecological responsiveness (e.g., Hart 1995; Bansal and Roth 2000; Aguinis and Glavas 2012) and the more recent empirical focus on grand challenges (e.g., Berrone et al. 2016; Grodal and O’Mahony 2017; Venkatesh et al. 2017; Wright and Nyberg 2017), we still lack understanding of why and how for-profit corporations might seek to address such multifaceted and complex social and ecological challenges as part of their core strategy, as opposed to discretionary contributions to worthy causes.

Yet we encountered such strategic efforts in some corporations’ efforts in South Africa to systematically contribute to community resilience, that is, to building the capacity of a place-based community to enhance and maintain its members’ livelihoods in the face of both gradual and sudden social-ecological changes. In doing so, these corporations strategically address a number of grand challenges in their “local, territorially bounded” instantiation (Berrone et al. 2016, p. 1941). These efforts were strategic in that they involved significant investments, which were motivated by managers with reference to core business risks, rather than regulatory compliance, stakeholder expectations, reputation, or philanthropic objectives.

There has been some research on business organisations building their own resilience (Linnenluecke 2015) or on community empowerment (e.g., Ansari et al. 2012), but this could not explain the efforts we observed. Nor could predominant resource-based or institutional theoretical explanations for corporate social or environmental responsiveness (see, e.g., Hart 1995; Bansal and Roth 2000; Aguinis and Glavas 2012), because we saw neither competitive motives commonly associated with resource-based theory, nor institutional pressures on these companies. The closest we came to an explanation in the literature was that corporate managers worry about community resilience because they recognise their value chains’ interdependence with these communities and associated social-ecological systems (Winn and Pogutz 2013; Whiteman et al. 2013), but the resulting corporate responses have not been empirically elaborated. We thus ask, why and how do corporations seek to build community resilience as a strategic ambition?

We address this question by means of a comparative case study analysis (Eisenhardt 1989; Eisenhardt et al. 2016) of four corporations that proactively seek to build community resilience in five place-based communities, as well as three auxiliary, counterfactual cases that illustrate alternative pathways. This allowed us to develop a process model consisting of three sets of corporate practices (exploring; focusing and partnering; and contributing directly or indirectly) and three sets of contingent factors that motivate or shape these practices. We argue that corporations build community resilience when they have not just firm-specific but also place-specific resources at risk due to social-ecological changes that are insufficiently addressed by the government or other actors. Corporate resources also influence how directly managers become involved in this effort.

Our first contribution is to explain why and how corporations adopt a strategic and systemic approach to community resilience building, which has been called for by scholars but has scarcely been empirically analysed (Bansal 2019; Gold et al. 2018; Mcknight and Linnenluecke 2016; Whiteman et al. 2013; Winn and Pogutz 2013). Our second contribution is to expand resource-based and institutional explanations of pro-social and pro-environmental corporate strategies to emphasise social-ecological system viability and limited statehood as motivations and explanations of corporations’ strategic responses to grand challenges, despite the complexity and scale of the underlying social-ecological processes (Ferraro et al. 2015; George et al. 2016; Bansal et al. 2018).

Grand challenges are globally relevant, multifaceted, and complex social and ecological problems or ambitions that implicate diverse role-players and defy straightforward solutions (Ferraro et al. 2015; George et al. 2016). They have become salient for management scholars because organisations contribute to many of the underlying problematic trends, such as climate change (e.g., Wright and Nyberg 2017) and income inequality (e.g., Cobb 2016; Amis et al. 2018), and they are also involved—at least potentially—in ameliorating or even reversing them (George et al. 2016).

One such grand challenge is the need to enhance community resilience, or the ability of place-based communities to maintain and indeed enhance their members’ livelihoods amidst both gradual and sudden economic, social, or ecological changes. Resilience scholars seeking to bridge natural and social sciences in understanding these dynamics emphasise their enmeshment in social-ecological systems (Olsson et al. 2004; Walker et al. 2004; Folke et al. 2005; Berkes and Ross 2013). These social-ecological system interactions occur at various scales, but they “hit the ground,” so to speak, in “communities of place” (Maida 2007). Local communities are characterised by their members’ shared exposure to slow onset hazards and gradual pressures, such as droughts or deindustrialization, as well as sudden, disruptive events, such as floods or the demise of a large employer (Cutter et al. 2008). Community resilience thus highlights that while grand challenges “are global in nature, they are instantiated in local, territorially bounded contexts” (Berrone et al. 2016, p. 1941). Indeed, community resilience may be seen as the local nexus of other grand challenges including climate change, poverty, social inequality, and citizen empowerment.

Grand challenges are by definition complex, uncertain, and evaluative (Ferraro et al. 2015), which means that an individual corporation is unlikely to be allocated responsibility by its stakeholders to grapple with a grand challenge, nor will it easily identify competitive advantages that may stem from tackling such diffuse issues. An even more basic reason why corporate managers lack such motivation is that important aspects of grand challenges may manifest at temporal or spatial scales too small or large for managers’ attention: “large-scale processes, such as those related to climate change, require broad attentional extent, whereas small-scale processes, such as those related to local variations in poverty, require fine attentional grain” (Bansal et al. 2014, p. 217). Even if managers were to overcome these obstacles and, firstly, notice these problematic processes and, secondly, ascribe strategic salience to them, they would likely still struggle to develop a systematic, strategic response, given these same problem characteristics of complexity, uncertainty, and evaluativity.

Perhaps for such reasons, the management literature on grand challenges often identifies corporations as more part of the problem than the solution (e.g., Cobb 2016; Wright and Nyberg 2017; Hamann and Bertels 2018) or—when organisations are more positively involved—it focuses attention on non-profit organisations (e.g., Berrone et al. 2016; Mair et al. 2016; Grodal and O’Mahony 2017; Lawrence 2017), small-scale or emergent organisations (Williams and Shepherd 2016), or hybrid enterprises such as microfinance organisations (Cobb et al. 2016; Zhao et al. 2016). This literature could thus not explain the strategic corporate efforts at building community resilience that we encountered.

We then turned to the literature on community resilience. The bulk of this literature does not give much attention to corporations as salient actors (e.g., Folke et al. 2002; Olsson et al. 2004; Walker et al. 2004; Berkes and Ross 2013). There is a thriving management literature on resilience, but as Mcknight and Linnenluecke (2016, p. 2) argue in their review, most of this research “tends to be at the level of the firm, despite the need for a systemic approach to the relationship between firms and community stakeholders,” and it gives “little attention to the community level of analysis and the question of how firms contribute to community resilience.” There have been a number of studies on philanthropic responses to alleviate suffering and help rebuild after disaster (Muller and Whiteman 2009; Tilcsik and Marquis 2013; Ballesteros et al. 2017), but they do not explain any strategic links between the corporation and the communities in need of support.

Our third move, then, was to consider the literature on corporate pro-social and pro-environmental behaviour, given that corporate community resilience building efforts may be seen as a form or instantiation of these broader, more established concepts. As a platform to survey this extensive literature, we rely on Bansal and Roth’s (2000) model of ecological responsiveness, which has been fruitful also in analyses of corporate social responsibility, more broadly (Aguinis and Glavas 2012). They identified three categories or perspectives of firm motivations—competitiveness, legitimation, and responsibility—and link each of them to firms’ context and particular types of initiatives within the firms.

Bansal and Roth’s (2000) legitimation perspective is framed in terms of institutional theory, according to which firms become environmentally responsive due to a growing array of government laws and regulations, private regulation (such as rules and guidelines specified by industry associations), as well as more intangible social norms (Scott 1995; Hoffman 1999). Bansal and Roth (2000) argue that legitimation is associated in particular with initiatives related to regulatory compliance and impression management (see also, e.g., Delmas and Toffel 2008). That is, it emphasises reactive accountability for corporations’ social and ecological impacts, rather than the more proactive and systemic ambition of community resilience (cf. Winn and Pogutz 2013). Indeed, most practical and scholarly efforts to invoke regulatory and normative pressures on corporations have focused on the need to address negative corporate impacts on social and ecological systems. For instance, Idemudia and Osayande (2018, p. 156) highlight “the widespread expectation that companies should be held accountable for their impacts on the communities and the environment where they operate.” This focus on accountability is especially prevalent (and understandable) in sectors where social and environmental impacts are direct and significant, as in extractive industries (e.g., Owen and Kemp 2013; Gold et al. 2018; Idemudia and Osayande 2018). Yet—as will become more apparent in our empirical analysis—corporate contributions to community resilience are not in the first instance about addressing corporate impacts on their social-ecological context, but rather about addressing the social-ecological context’s impact on the corporation (see Winn and Pogutz 2013), based on the recognition of systemic interdependence and corresponding business risks. Extant uses of institutional theory seem to offer little purchase in explaining this.

Bansal and Roth’s (2000, p. 724) second category is competitiveness, which relates to “the potential for ecological responsiveness to improve long-term profitability.” They make reference in this regard to the resource-based view of the firm (Barney 1991) and in particular Hart’s (1995) natural-resource-based view (see also Hart and Dowell 2011). Building on prior arguments centred on opportunities for product differentiation and cost efficiencies (Hart 1995; Porter and Van der Linde 1995), Bansal and Roth (2000) suggest that competitiveness is associated with process intensification and the development and marketing of green products—these motives and actions again seem to have little salience to community resilience building. Furthermore, an instrumental, profit-driven agenda has been repeatedly criticised as hampering corporate contributions to social and environmental causes at the community level. Emphasising the “business case” for such corporate engagement leads to a “transactional approach [that] conceives communities as beneficiaries and corporations as benefactors [and thus…] fails to reflect communities as complex systems” (Gold et al. 2018, p. 664).

Bansal and Roth’s (2000, p. 728) third category focuses on “a sense of obligation, responsibility, or philanthropy rather than out of self-interest,” with environmentally responsive firms developing a “corporate environmental ethic” (Henriques and Sadorsky 1999, p. 97). Bansal and Roth argue that this ethical motive gives rise to initiatives such as philanthropic donations. While philanthropic contributions to community resilience have been described, especially in anticipation or in the wake of disasters (Muller and Whiteman 2009; Tilcsik and Marquis 2013; Ballesteros et al. 2017), this did not explain the efforts that we encountered among some corporations, which were distinguished, in our view, by their strategic nature in both motivation and implementation.

In sum, the extant literature on pro-social and pro-environmental corporate behaviour has largely focused on institutional, competitiveness, and ethical drivers and corresponding strategies, but there remains a gap between these explanations and visible corporate efforts to build community resilience. The most pertinent observation we came across in the literature is that corporate leaders are concerned with the longer-term viability of social-ecological systems (Winn and Pogutz 2013; Whiteman et al. 2013), upon which their businesses depend, but this argument has not been empirically substantiated, as far as we know. This lacuna motivated our inductive study of why and how corporations seek to build community resilience as a strategic objective.

Our analysis resulted in a model of corporate contributions to community resilience as illustrated in Fig. 1, consisting of three contingent factors, which each motivate or shape three successive corporate practices in community resilience building. There are also two alternative pathways, which illustrate why corporations do not strategically contribute to community resilience in response to two of the contingent factors. We describe each of the three practices (or alternatives) and their associated contingent factors in turn. Figure 1 mentions in brackets the case study companies demonstrating different paths in the model, and Table 3 provides an overview of each case study company.

Our motivation for this research was an initial encounter with strategically motivated and enacted corporate community resilience initiatives, for which we found incomplete explanations in the literature. There has been some research on business organisations building their own resilience (Linnenluecke 2015) and on businesses considering community empowerment as part of their “base of the pyramid” efforts (e.g., Ansari et al. 2012), but this could not explain the efforts we observed. Nor could predominant resource-based or institutional theoretical explanations for corporate social or environmental responsiveness (see, e.g., Hart 1995; Bansal and Roth 2000; Aguinis and Glavas 2012), because we saw neither competitive motives commonly associated with resource-based theory, nor institutional pressures on these companies. We thus studied four companies’ community resilience building efforts in detail, and we also included in our analysis three other companies that did not embark on or fulfil such a process. This analysis gave rise to our model of corporate contributions to community resilience, which identifies three sets of practices—exploring, focusing and partnering, and contributing directly or indirectly—and three sets of contingent factors that precipitate or explain each of these practices. This model makes two contributions: one to the management literature on community resilience, and another to the broader conversation about social-ecological responsiveness in the context of grand challenges.

There are a number of limitations of our study, some of which suggest additional avenues for further research. First, we focused our data collection on corporations that made significant, overt investments into building community resilience. While we included three auxiliary cases for the sake of counterfactual analysis, we had limited data on these cases. Elaborating our model in Fig. 1 would thus benefit from further comparative analysis or even quantitative testing of hypotheses based on our propositions. Elaborating and substantiating our model is also practically relevant, because while our analysis highlights the innovative responses of some corporations to grand challenges, it cautions against too much optimism because it also provides at least an initial explanation for why many other corporations do not develop such responses.

Second, because of our sample size and study duration we are unable to discuss in any detail the outcomes or impacts of these efforts, even though the development of impact logic models (Wry and Haugh 2018) was an important part of our case analyses (and this was of particular interest to the managers participating in our engaged scholarship project). Studying the impacts of companies’ community resilience building efforts thus remains an important ambition, for both scholarly and practical reasons. More specifically, attention should be given to possible unintended consequences. In our research, we did give attention to two possible unintended consequences. We explored whether companies’ contributions might replace and “crowd out” the state from fulfilling its constitutional responsibilities (cf. Hamann 2019), or whether they might create unjust outcomes in the form of benefits to well-off community members (e.g., InCo clients) at the expense of poor and vulnerable community members. Despite our probing we did not find evidence in our cases of these unintended consequences. Nevertheless, in the context of broader debate surrounding companies’ contributions to filling governance gaps (e.g. Scherer and Palazzo 2011), these concerns deserve further consideration.

We explored why and how corporations seek to build community resilience as a strategic response to grand challenges. Our model highlights the role of firm- and place-specific resources, as well as limited statehood, in motivating and shaping such corporate efforts. We have thus tried to catch up with corporate efforts that have arguably outpaced scholars’ efforts to empirically analyse organisational responses to grand challenges. We found in the process that well-worn theoretical perspectives still provide powerful platforms for explaining such innovative strategies, but they require notable expansions in their assumptions of corporations’ strategic priorities and responses to institutional complexity wrought by grand challenges, with significant implications for both scholarship and practice.