Purpose – The purpose of this paper includes two interconnected objectives. The first is to provide a reconceptualisation of social value creation as social constraint alleviation. The second is to respond to the call put forward by Giuliani and Macchi (2014) to produce synergies between bodies of literature exploring the development impact of businesses. The paper focuses on ideas from the global value chain/global production networks (GVC/GPN), business and human rights, corporate social responsibility (CSR), international business (IB) and (social) entrepreneurship literatures. Design/methodology/approach – The paper offers a reconceptualisation of social value creation by building on the synergies, complementarities and limitations of existing concepts identified through the literature review. Findings – The reconceptualisation of social value creation put forward in this paper contributes to the literature in the following way. It offers a useful and clear definition of the term “social” (Devinney, 2009), and it attends to the limitations of the constraint concept as put forward by Ted London and his collaborators (London, 2011). Furthermore, it sketches out the basic ideas of a two-system approach to allow for the differentiation between symptom treatment and root cause alleviation. Finally, it offers a refinement of Wettstein’s (2012) proposed capability-based remedial action concept. The paper furthermore proposes that there are three distinct ways in which businesses generally respond to social constraints. Originality/value – The paper illustrates how the redefined concept of social value creation can connect different bodies of literature and help make sense of existing empirical results, without engaging in definitional debates.
The collapse of state socialism in Eastern Europe has transformed many of the institutions governing state enterprises and was expected to lead to radical changes in enterprise structures and practices. This was especially so where ownership had changed. However, just as new constitutions do not create liberal democracies overnight, so too the withdrawal of the state from direct control over the economy and privatization does not automatically generate dramatic enterprise transformations. This study of 27 Hungarian enterprises in the early 1990s shows that products and the markets served changed remarkably little, and the employment and organizational changes that have taken place in most enterprises have been less radical than might be expected. Ownership changes have not always led to major shifts in control, nor have private owners implemented sharply different policies from state controllers. The highly fluid institutional environment limited the commitment to, and capacity for, major strategic changes in most substantial Hungarian enterprises. Where changes have occurred, they have been most significant in: (a) state enterprises that are in severe financial difficulties, and (b) companies controlled by foreign firms.
The rapid liberalization of the former state socialist economies of Eastern Europe coupled with privatization were thought by many in the early 1990s likely to generate effective capitalist firms quite quickly. However, the radical institutional transformation and collapse of Soviet markets resulted in considerable uncertainty for most companies which, together with high sunk costs and lack of resources, inhibited organizational restructuring and strategic change. Despite high levels of foreign ownership and control by the mid-1990s, many Hungarian companies continued to produce much the same kinds of products for mostly the same customers with inputs from mostly the same suppliers as in 1990. While most had reduced employment substantially, and many had disposed of ancillary organizational units, the bulk of the companies considered here had not greatly altered their work systems and overall organizational structures. In the few enterprises where the production process had been extensively reorganized by 1996, this was funded and directed by foreign firms who had taken them over. These foreign firm-controlled companies also tended to have new top managers from outside the enterprise. They additionally introduced new products more often than Hungarian firms, albeit within rather narrow product lines that usually dominated the domestic market. Overall, most of the enterprises studied were still doing much the same set of activities in the mid-1990s, though with fewer staff, as at the start of the decade, and privatization per se had not led to major shifts in enterprise structure and strategy, nor did it seem likely to do so in the foreseeable future. Policy prescriptions and analyses of the transformation of the former state socialist societies of Eastern Europe have been summarized as conflicts between those emphasizing the path dependent nature of agents, institutions and behaviour and those celebrating the strategic abilities of rational agents to respond to market incentives (see, for example, Crawford and Lijphart, 1997; Nielsen et al., 1995). The former group of 'cultural historicists' (Rona-Tas, 1997) denounce the hope-Address for reprints: Laszlo Czaban, Manchester Business School, University of Manchester, Oxford Road, Manchester M13 9PL, UK.
In terms of ownership and operations, many companies in Eastern Europe have now been integrated into the world economy. In this article, informed in part by a critical engagement with the Global Commodity Chains (GCC) perspective, we explore the nature and significance of international linkages among firms in Eastern Europe. In particular, we argue that it has been the legacies of the state socialist past embedded in the inherited macro-and microeconomic structures, on the one hand, and the strategies of multinational firms on the other, rather than the international linkages in any simple sense, that have been the main influencing factors. While we do not deny the existence of inter-firm relations similar to the ones described in the GCC literature, we point out that these relationships are much more complex than assumed in that approach and that this complexity is a product of the very different historical backgrounds and modes of incorporation into the world economy of the various Eastern European societies. Drawing on empirical evidence from Hungary and focusing specifically on employment and other labour issues, we argue that there are a variety of firm development paths in Eastern Europe and that these have differing implications for the integration of firms, regions and countries of Eastern Europe into the world economy.
Inter-firm relationships vary greatly between capitalist economies as a result of institutional differences, especially in forms of trust and prevalent mechanisms of ensuring that commercial agreements are kept. The transformation of the command economies of Eastern Europe since 1989 and the intensification of competition in their major markets might be expected to destroy previous connections between suppliers and customers and generate instead short-term, ad hoc contractual relationships. However, this study of ten large enterprises in Hungary found that contractual relations between them tended to be more similar to the Japanese firms studied by Sako in her Prices, Quality and Trust (1992) than to the British ones. This seems to reflect the limited extent of change in products, markets and organizational structures of these firms — and the gradual approach to transformation adopted in Hungary as a whole — as well as their specialization in particular industrial branches and their high degree of mutual dependence through debt. Continued dependence on the state has meant that competition between these firms for political support remains important and so they compete more across industrial sectors than within them.
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