RESPONSE - Insead

A model of cognitive alignment and social performance Objectives and the state of the art
values concerning what is desirable, proper, or appropriate (Suchman, 1995).
Normative legitimacy lies in the domain of social values (Selznick, 1957) and is
indicative of society’s moral evaluation of the norms and values, means and ends of an
organisation. Multinational organisations are subject to a multiplicity of conflicting
institutional demands. Efforts to mitigate the risk associated with one set of institutional
demands can trigger new complaints by another set of advocacy groups concerned
with other institutional values.
b. The second external factor considered is the social movement context. This largely
determines the strength of the advocacy groups expressing particular institutional
demands. The various social movement histories, infrastructure and political systems of
diverse countries give advocacy groups different levels of influence. For example, the
US, France, Germany and UK tend to have more powerful groups which push their
institutional demands than, say, Ukraine or Singapore. Within a single country the
strength of various advocacy groups will also differ by issue. In France, for example,
social movements supporting the “French cultural exception” are quite powerful while
anti­nuclear groups are relatively weak.
c. A third external driver that potentially affects a firm’s alignment is the industry in which it
operates. Some industries, for example those with “high externalities” such as mining
or dam construction, or high­profile industries such as big brand retailers attract more
attention and social pressure. Therefore the firms within these industries may be more
prone to react to events in their external environments.
Objective 3, to understand the impact of internal factors, is drawn from a range of observations within
the firm.
a. Most importantly, how effectively does a company gather knowledge through processes
of stakeholder engagement and learning? Within the small literature on environmental
scanning, the problem of gathering information on the social (rather than economic)
objectives and actions of peers has received attention only very recently (A. Palmer, B.
Hartley 2002). Even in these recent treatments, however, there is only limited attention
given to the fundamental problem: firms can scan only a very small portion of their
environment. In order to be efficient in the use of their cognitive resources, therefore,
they need to understand how to direct their attention among all the possible
phenomena that they could potentially scrutinise under a given issue (in our case,
CSR). The efficiency and effectiveness of these processes should be sensitive to
improvements in information management systems, but the degree to which this is the
case and the conditions for which the link is stronger or weaker still await scholarly
attention. A second barrier to effective response strategies concerns the cognitive
limitations of the individual. Some time ago (H. A. Simon 1959) noted that "[t]he
decision­maker's model of the world encompasses only a minute fraction of all the
relevant characteristics of the real environment, and his inferences extract only a
minute fraction of all the information that is present even in his model". The large
literature on managerial and organisational cognition (Walsh, 1995, for a review) takes
these foundational observations on bounded rationality seriously in their studies of how
managers form cognitive representations of the world and use them to make decisions.
Similarly to the organisational level, these cognitive­behavioural learning processes
could potentially be significantly enhanced through the enhanced efforts by managers
to deliberately share their experiences and inferences from their interactions with the
external environment. Besides the investments in articulation of their implicit
knowledge, codification processes might be particularly useful to force rigorous thinking
about ‘fuzzy’ problems such as the appreciation and response to societal demands
(Zollo and Winter, 2002).
b. However, knowledge management is only one internal factor that we hypothesise to
drive cognitive alignment. Business strategy and the founding beliefs about the firm’s
role in society also impact cognitive alignment (table 1). A company focused on
differentiating itself against competitors might be expected to maintain closer links with
customers and thus exhibit closer cognitive alignment with this bracket of stakeholder.
Alternatively, a company focused on cost minimisation might be relatively unresponsive
to the needs of its suppliers and so allows cognitive differences to widen.
RESPONSE: understanding and responding to societal demands on corporate responsibility
19