Overcoming the dual liability of foreignness and privateness in international corporate citizenship partnerships

Abstract

Responding to increased demands from stakeholder groups, many companies have instituted corporate citizenship programs in recent years, leveraging their specialized resources to create public goods and services at home and abroad. Significant suspicion nonetheless remains about the motives and impact of corporations acting in domains traditionally served by government and “third-sector” organizations. We argue that such ambivalence undermines the perceived legitimacy of private investments in public goods, and that this fundamental liability of privateness (LOP) constitutes a significant obstacle to corporations acting in the public domain through corporate citizenship initiatives. For multinational corporations (MNCs), the challenges stemming from the LOP are further amplified by the liability of foreignness (LOF) commonly associated with international business operations. We discuss the origins of the LOP and derive implications of the “dual liability” of LOP and LOF for partnering choices in MNCs’ corporate citizenship programs. We highlight limitations on the set of credible governance mechanisms available to participants in these partnerships, describe a set of alternative governance arrangements that serve to realign incentives among alliance partners, and link these to the severity of the LOP in a particular setting. We illustrate our arguments with a case description of Microsoft's Partners in Learning program.