Leadership, stakeholder culture, and social innovation: The role of care and compassion

Abstract

The resolution of some of the most pressing social problems in the world (poverty, pollution, pandemics) calls for leadership support, engagement and innovation from different sectors, including business. In this paper we examine if and how business leaders engage in social innovation. Social innovation refers to a novel solution that will be developed for the purpose of addressing an unmet social need or problem (e.g. problem of justice, fairness, environmental preservation, better education, or improved health) – with the benefits primarily accruing to stakeholders in need or whole underprivileged societies. We show that different leadership perspectives (shareholder versus stakeholder) and leadership approaches (personalized versus socialized) affect the quality of social innovation (first-order versus second-order solutions) pursued by business leaders. While a first-order solution deals with the symptoms of a problem, a second-order solution is designed to tackle the roots of a problem. We argue that leaders with a stakeholder perspective and socialized approach are more likely to foster sustainable second-order social innovations geared toward treating the roots of societal problems due to their care and compassion for stakeholders. We also demonstrate that the stakeholder culture of an organization has a mediating role in the innovation process and either hinders or fosters leaders to engage in second-order social innovation. Moreover, we discuss the possibilities of leaders to foster a climate of social innovation within the organization.