Strategic Perspectives on Public ValueFILE/... · 2016-09-20 · Strategic Perspectives on Public Value 16 PURPOSE This introductory chapter serves a threefold purpose: First, it

Strategic Perspectives on Public Value

DISSERTATION

of the University of St. Gallen,

School of Management,

Economics, Law, Social Sciences

and International Affairs

to obtain the title of

Doctor of Philosophy in Management

submitted by

Theo Pepe Strathoff

from

Germany

Approved on the application of

Prof. Dr. Peter Gomez

and

Prof. Dr. Timo Meynhardt

Dissertation no. 4566

Difo-Druck GmbH, Bamberg 2016

The University of St. Gallen, School of Management, Economics, Law, Social

Sciences and International Affairs hereby consents to the printing of the present

dissertation, without hereby expressing any opinion on the views herein

expressed.

St. Gallen, May 30, 2016

The President:

Prof. Dr. Thomas Bieger

ACKNOWLEDGEMENTS

First, I would like to express my sincerest gratitude to my supervisor,

Prof. em. Dr. Peter Gomez. I am equally grateful to my co-supervisor Prof. Dr.

Timo Meynhardt. This dissertation could not have been written without an

ongoing dialogue and continuous feedback on new ideas and evolving paper

manuscripts. I could not have wished for a better and more inspirational thesis

supervision. It has been a true privilege to work so closely with these two

distinguished scholars. I also thank Prof. Dr. Timo Meynhardt for co-authoring

four of the papers in this dissertation.

I would also like to thank Professor Mark Moore at Harvard Kennedy

School who has opened the door to this wonderful institution and was extremely

generous in sharing his time and wisdom throughout my fellowship. Working

with him has greatly helped me to situate my research within the broader public

value research community.

I am also grateful to the Fredy und Regula Lienhard-Stiftung for

enabling my research stay in Harvard with financial support.

Four of the papers in this dissertation are the product of inspiring

collaboration with other scholars and practitioners. I would like to thank my co-

authors Steven A. Brieger, Lorenz Beringer, Sebastian Bernard, and Jennifer D.

Chandler for the great collaboration.

Further thanks are also due to Caroline Geissler and Mary Anne

Baumgartner for their kind and enduring administrative support and to the entire

public value research community in St. Gallen, Lüneburg, and Leipzig for many

fruitful discussions.

I would also like to thank my dear friend Andrea Winkelmann for her

outstanding layout support on the finishing straight. It is arguably a sign of a

really good friendship when you don’t hear from someone for a while and that

person is then there when you need it the most.

On a personal level, I would like to express my special gratitude to

Katharina Jaroch. Thank you dear Jaro for your love and ongoing support.

Having you by my side and counting on your support has greatly enabled me

and given me a lot of energy. Thank you for being who you are.

I feel deeply obliged and grateful to my parents and grandparents to

whom I owe so much. Their life story of hard work, dedication, and

achievement has been and always will be an inspiration to me. Their

unconditional love and appreciation has always given me a lot of strength. They

have given me both: roots and wings. It is to them that I dedicate this thesis.

ZUSAMMENFASSUNG

Diese Dissertation wendet die – von Moore geprägte und von

Meynhardt weiterentwickelte – Public Value-Theorie auf Themen des

strategischen Managements an. Strategisches Management beschäftigt sich mit

der Positionierung von Organisationen in einer dynamischen Umwelt. Ein

zentraler Bestandteil der Umwelt von Organisationen ist deren

gesellschaftliches Umfeld.

Die Dissertation setzt sich aus sechs eigenständigen, theoretisch

verbundenen Beiträgen zusammen: Das einleitende Kapitel gibt einen Überblick

zur Public Value-Forschung, und begründet die Wahl von Meynhardts Public

Value-Ansatz als theoretische Perspektive. Das erste Paper schafft einen

Überblick zur Business and Society-Forschung und schlägt darauf basierend

vor, das VBA Modell von Schwartz und Carroll um eine Public Value-

Dimension zu ergänzen. Basierend auf Daten zur Schweizer Bankenindustrie

aus dem GemeinwohlAtlas analysiert das zweite Paper den Zusammenhang

zwischen dem Public Value einzelner Unternehmen und dem Public Value der

zugehörigen Industrie. Ein starker Zusammenhang zwischen Unternehmens-

und Industrie-Public Value deutet auf eine Public Value Allmende in der

Schweizer Bankenindustrie hin. Im dritten Paper wird untersucht, wie der Public

Value der öffentlichen Verwaltung in der Schweiz mit der individuellen

Lebenszufriedenheit zusammenhängt. In Ergänzung zu bestehenden Modellen

der Glücksforschung wird deutlich, dass eine wertschöpfende öffentliche

Verwaltung zur Lebenszufriedenheit beiträgt. Das vierte Paper zeigt in einer

Fallstudie, wie der Fussballverein FC Bayern München mit den Public Value-

Herausforderungen umgeht, welche durch das schnelle Wachstum und die

Internationalisierung bedingt sind. Schliesslich schlägt das fünfte Paper wieder

den Bogen zu den einleitenden konzeptionellen Diskussionen über den

Wertschöpfungsbegriff, indem eine synergetische Perspektive auf

Wertschöpfungsprozesse in Dienstleistungssystemen präsentiert wird.

SUMMARY

This dissertation applies public value theory – which Moore coined and

Meynhardt developed further – to strategic management issues. Strategic

management deals with positioning organizations in dynamic environments. A

key element of organizations’ strategic environment is society. Organizations

perform a societal function and are dependent on social approval assets.

The dissertation consists of six independent yet theoretically connected

contributions. The introductory chapter sets the stage by giving an overview of

the public value literature, sketching the challenge of providing a societal

perspective for strategic management, and arguing why Meynhardt’s public

value approach is chosen as the dissertation’s theoretical perspective. The first

paper is a conceptual piece which reviews the business and society literature and

proposes the inclusion of a public value dimension in Schwartz and Carroll’s

VBA model. The second paper empirically analyzes the relationship between

firm public value and industry public value based on GemeinwohlAtlas data on

the Swiss banking industry. A strong relationship between industry and firm

public value is found, indicating a public value commons in the Swiss banking

industry. Based on the same dataset, the third paper analyzes the relationship

between the Swiss public administration’s public value creation and individual

happiness. It is found that a public value-creating public administration

contributes to individual happiness, extending existing models from economic

happiness research. The fourth paper is a case study on the football club FC

Bayern Munich. It shows how an organization under intense public scrutiny

deals with public value challenges resulting from rapid growth and

internalization. The fifth paper ties into the initial conceptual discussions on

value creation by proposing a synergetics perspective on value co-creation

processes in service ecosystems.

13

OVERVIEW OF CONTENTS

INTRODUCTION 15

PAPER 1: 77

The VBA Model and Public Value: Filling the Value Gap

PAPER 2: 109

Public Value Commons: Evidence from the Swiss Banking Industry

PAPER 3: 155

Public Value and Happiness: Evidence from Public Administration in

Switzerland

PAPER 4: 195

FC Bayern Munich: Creating Public Value Between Local Embeddedness and

Global Growth

PAPER 5: 223

Systemic Principles of Value Co-Creation: Synergetics of Value and Service

Ecosystems

14

15

INTRODUCTION

Pepe Strathoff

January 2016

Abstract

The introductory chapter sets the stage for the cumulative dissertation.

It starts with a presentation of the public value approach with a focus on its roots

in the public sector, the work of its main protagonists – Mark Moore, Barry

Bozeman, and Timo Meynhardt – and its reception. The need for an approach

that deals with societal issues from a strategic management perspective is then

formulated. It is argued that neither the strategy nor the business and society

field provide such an approach.

Meynhardt’s public value approach is therefore identified as an

approach to deal with societal issues from a strategic management perspective.

It is argued that this transfer of theory from public management is justified due

to shared features of public and private organizations – publicness and being an

institution – and increasingly blurred sector boundaries. A theoretical

background on what the assumption of a public value perspective means for the

evaluating subject (“calling a public into existence”) and for the evaluated

object (“the common good”) is provided. This also sketches the theoretical

context of the five papers pertaining to broader questions of the common good,

values, and political philosophy.

The chapter then provides a brief summary of the five papers. It

concludes by deriving implications for theory and practice as well as avenues

for further research, resulting from a joint reading of the five papers and from

generally assuming a public value perspective on strategic management.


16

PURPOSE

This introductory chapter serves a threefold purpose: First, it gives an

overview of the public value research field and demonstrates how the public

value approach can be seen as a (re-)discovery of a societal dimension in

strategic management. Second, it summarizes the five papers this dissertation

consists of and describes how each one contributes to a societal viewpoint on

key issues of strategic management. Third, the chapter derives common

conclusions, implications, and potential for future research of the dissertation as

a whole.

In this chapter, a lot of authors, themes, and thoughts appear that are

taken up in the five papers that compose the dissertation’s main body. Some will

not appear again explicitly, as they sketch the broader theoretical context of the

focused journal-format papers. In this way, the introduction is supposed to show

the connection of the five papers to broader questions of the common good,

values, and society.

HISTORICAL CONTEXT: PUBLIC VALUE AS A

RESPONSE TO THE NEOLIBERAL ZEITGEIST

Public value was initially conceived as a management approach for the

public sector. The public value idea originated as a response to the neoliberal

zeitgeist of the 1980s/1990s which was skeptical about the public sector’s

capacity to contribute to economic and social progress. In his 1981 inaugural

address, former US President Ronald Reagan proclaimed that “government is

not the solution; government is the problem” (Reagan, 1981) and in the UK,

former Prime Minister Margaret Thatcher (1987) stated: “There is no such thing

as society!”

Introduction

17

This general disbelief in the capacity of government and even in the

very existence of a collective1 is also reflected in the dominant ideas about

public administration of the time (Benington & Moore, 2011; Bryson et al.,

2014). Under the umbrella of New Public Management (NPM), there was an

attempt to make government more efficient and innovative. According to

Bozeman (2007: 7), NPM “has to some extent codified and prescribed

governance approaches based on economic individualism and market

mechanisms.” In this sense, NPM was not value free, but entailed a (neoliberal)

notion of emphasizing the individual over the collective and doubting that a

collective dimension matters to the individual.

Clearly, NPM was inspired by management techniques and practices

from the private sector and it was a core idea to employ these in public

administration (Hood, 1991; Osborne & Gaebler, 1992; Schedler & Proeller,

2006). Among several other actions, this included public service outsourcing, a

view of citizens as “customers” of the government, and the introduction of

controlling measures to be used as key performance indicators for public

managers and their organizations. Public value, the theoretical approach

underlying this dissertation, is based on a more positive attitude towards the

public sector than NPM. Yet, it was not a countermovement in the sense of fully

renouncing NPM ideas and moving back to a more traditional bureaucratic type

of public administration. Instead, it embraced several NPM ideas and objectives,

such as aiming to make government more responsive, innovative and effective

(Bryson et al., 2014).

However, public value differed in a crucial assumption: It was

committed to the “idea that the proper arbiter of public value is society”

(Benington & Moore, 2011: 10). Thus, public value brought the societal

dimension back to the fore in public management and provided a counterweight

to economic individualism (Bozeman, 2007). By acknowledging the need for

1 We use the term “collective” to include both “community” and “society” types of social

organization (see Tönnies, 2012).


18

reform in the public sector, while keeping a notion of a collective dimension

that matters, public value could also be seen as the public management approach

accompanying “third way” thinking (Giddens, 1998). Indeed, an initial major

practical application took place in the UK, where the concept was discovered

and promoted by the Work Foundation, a think tank close to the quintessential

third way government of Labour Party Prime Minister Tony Blair (Crabtree,

2004).

The emphasis on or even rediscovery of a collective dimension in

strategic management is a key feature of the public value approach and a

guiding theme for this dissertation. In the subchapter “Strategy and Society”, we

discuss how the idea that society is a major determinant of an organization’s

environment is a strategic management question. In the subchapter “Extending

Public Value to Other Sectors”, we then present an argument about why the

public value concept is not only useful for strategic management in the public

sector, but can be transferred to organizations in other sectors, especially to

private sector business firms. A little more background on the roots of public

value in public management thinking and on the concept’s theoretical

foundations is given first.

PUBLIC VALUE: ROOTS IN THE PUBLIC SECTOR

The term “public value” as a strategic management concept was first

used in Mark Moore’s article Public Value as the Focus of Strategy (Moore,

1994) and popularized with his seminal book Creating Public Value: Strategic

Management in Government (Moore, 1995). In the book, Moore argues that

while several management concepts from the private sector found their way into

public management (for instance customer orientation and the increased use of

performance measurement), the crucial concept of corporate strategy has not

been translated adequately.

Introduction

19

Given the importance of the strategy concept for business management

in complex environments and the increasingly complex (task and political)

environment around public sector organizations, this appeared to be quite a

research gap. Moore therefore positions his book as an attempt to fill that gap

pertaining to strategic management. Since the publication of Moore’s book two

decades ago, the public value research field has evolved. Research on public

value is frequently published in foremost public management journals and a

number of journal special issues/focal topics (e.g. International Journal of

Public Administration, 2009; Zeitschrift für Organisationsentwicklung, 2013;

Public Administration Review, 2014) as well as edited volumes (e.g. Benington

& Moore, 2011; Bryson et al., 2015a, 2015b) have been devoted to the topic.

This wealth of publications and applications in practice (see the section

“Reception and Criticism”) has made the public value field more diverse and

complex. Accordingly, Williams and Shearer (2011) pointed to a degree of

uncertainty about what public value actually is and what the most important

elements of the literature are. For the purpose of this introduction, we follow the

recent categorization of major theoretical approaches by Bryson et al. (2014,

2015a), which relies on an extensive review of the public value literature and

has been widely received in the public value research community. Bryson et al.

(2015a: 2-11) identify three major streams in the public value literature: Mark

Moore on Creating Public Value, Barry Bozeman on Public Values, and work

concerning Psychological Sources of Public Value by Timo Meynhardt. In this

section, we give a concise overview of all three approaches. This will be an

important foundation for this dissertation’s endeavor to apply public value

theory to strategic management issues and conduct empirical research based on

Meynhardt’s approach.


20

Mark Moore on Creating Public Value

As mentioned above, Mark Moore coined the term “public value” for

public management with the 1995 publication of his book Creating Public

Value: Strategic Management in Government, in which he develops a normative

theory of strategic management for the public sector. He explains that his work

is neither concerned with the behavior of organizations (but managers) nor with

explaining what managers do and why (but what they should do). The purpose

of Moore’s work is to support public managers in making strategic decisions,

thereby increasing the value to the public of the organizations that are entrusted

to them. Moore (1995: 10) defines public value as a notion of “managerial

success in the public sector […] initiating and reshaping public sector

enterprises in ways that increase their value to the public in both the short and

the long run”.

Moore, a professor at Harvard University’s Kennedy School of

Government, points out that he developed the ideas behind his approach through

years of interaction with public management practitioners while teaching in the

School’s executive education programs. He clarifies that the public value idea –

seen as the result of a convergence of public administration (concerned with

management) and public policy (concerned with policies) thinking – is also the

result of a certain institutional way of thinking and culture at the Kennedy

School.

This convergence points to a central aspect in Mooreian public value

thinking: Moore advocates an active, entrepreneurial, and value-creating role for

public managers that goes beyond the mere administrative implementation of

policies produced in the (democratic) political process. He sees the Wilsonian

politics-administration dichotomy (Wilson, 1887) as an impediment to public

managers’ sense of purpose (and to becoming more similar to their private

sector counterparts) when stating that “society denies its public sector the key

ingredient on which its private sector specifically relies to remain responsive,

Introduction

21

dynamic, and value creating, namely the adaptability and efficiency that come

from using the imaginations of people called managers” (Moore, 1995: 19).

Moore therefore advocates a penetration of the line between policy and

administration. In this regard, his approach sits squarely in the Waldonian

tradition of seeing public administration’s task to “help society change and

adjust in ways that maximize the potential for ‘goods’ and minimize the

potential for ‘bads’” (Waldo, 1968: 367).

Essentially, Moore (1995) wants to help public managers assume such

a value-creating role. He explicitly states that he sees the creation of public

value by public managers as an analogy to the creation of private value through

managerial work in the private sector. Moore (1995) argues that such a strategic

conception of public management requires public managers to align three

perspectives: substance, politics, and administration. Accordingly, he presents

the “strategic triangle”, a management framework that is supposed to support

public managers in evaluating their strategies for the creation of public value

from all three perspectives:

1. Public Value: Any appropriate strategy must be substantively valuable,

meaning that it aims at producing something that is considered

valuable by overseers, citizens, and recipients. Such public value to be

created might for example be defined as “cleaning up streets”, “closing

the racial achievement gap in schools” or “making applying for a

passport easier for citizens”.

2. Legitimacy and Support: Any strategy must be considered legitimate

and must find political support in the organization’s authorizing

environment. This consists primarily of those individuals and groups

involved in formal decision-making structures (superiors, politicians,

higher-level public administration, and the electorate) which directly

control the flow of resources (authority and money) to the organization.

3. Operational Capacity: Any strategy in public management has to be

feasible in the sense that the organization has the operational and


22

administrative means to implement it. This means that the organization

is actually capable of delivering to its publicly valuable objectives.

This framework is at the core of Moore’s (1995) public value approach.

In this view, the strategic and entrepreneurial public manager is tasked with

envisioning strategies that are appropriate from all three perspectives

simultaneously. These perspectives are clearly not independent from one

another: It is much easier to garner political support for some public values than

for others and a high level of political support can make it easier to acquire

additional resources and build operational capacity.

In his 2013 follow-up book Recognizing Public Value, Moore focuses

on measuring public value and develops the strategic triangle further to his

version of a public value scorecard. However, the Public Value Account that

Moore presents takes the form of a structured balance sheet-like listing of a

project’s public value costs and benefits (see 2013: 180) and does not allow a

systematic comparison or quantification of public value creation. Moore also

clarifies that the role he gives to public managers poses “a political, technical,

and managerial challenge, as well as a philosophical one” (2014a: 472). This

quote underlines the importance that Moore attributes to the individual public

manager in making public value-creating decisions.

Barry Bozeman on Public Values

As outlined, Moore’s perspective is very managerial, with the clear

purpose to “guide managers of public enterprises” (1995: 1). Barry Bozeman’s

work, in contrast, is more concerned with the societal level (Bryson et al.,

2015a). He defines public values as “those providing normative consensus about

(a) the rights, benefits, and prerogatives to which citizens should (and should

not) be entitled; (b) the obligations of citizens to society, the state, and one

another; and (c) the principles on which governments and policies should be

based” (Bozeman, 2007: 13).

Introduction

23

Importantly, Bozeman (2007) frames his work as a contribution to the

common good discourse. Based on his diagnosis that common good (or public

interest) thinking has been on the decline due to a preoccupation with economic

development and individualism, he formulates the purpose of his work as

providing a theoretical notion of normative publicness. This is based on his

assumption “that the ability to provide strong theoretical rationales for

approaches to public policy and management greatly enhances the ability to

influence policy agendas and choices and, ultimately, advances normative

publicness” (2007: 18).2 For Bozeman (2007), the public interest is a hard-to-

define ideal about what best serves a social collective, whereas public values are

specific and identifiable.

Bozeman criticizes the notion that government is only supposed to step

in when market failure occurs (e.g., due to externalities or monopolies). He

discards this view, as it implicitly assumes that the market will be better in

providing what society needs, giving the public sector a subsidiary role only for

when market mechanisms fail. Instead, Bozeman proposes the idea of public

value failure. This term describes situations in which neither the state nor the

market provide the conditions and outputs that are necessary to achieve public

values (Bozeman, 2007). Bozeman emphasizes societal (public) values and

whether these are met, irrespective of the delivering organization’s legal status

as public or private (Meynhardt 2009).

A crucial question for Bozeman (2007) concerns the identification of

public values. He proposes a public value mapping model with criteria to

identify public values. For Bozeman (2007: 140-141), examples of public values

are “altruism,” “citizen involvement,” “businesslike approach,” or “protection of

rights of the individual,” Building on the public value mapping model, Welch et

2 The notion of publicness is central to Bozeman’s thinking. In the section “Extending Public

Value to Other Sectors”, Bozeman’s claim that publicness is a property of government (“public”) as well as business (“private”) organizations is used to argue why public value

thinking is indeed appropriate for tackling strategic issues in business firms.


24

al. (2015) propose a four-step public value mapping process which involves the

identification of public values, the assessment of public value failures and

successes, the actual public value mapping as well as a consideration of the

relationships between public value and market failures and successes.

Bozeman’s work is not limited to identifying society’s public values as

manifestations of the public interest. His approach also holds direct lessons for

public management, as public values are seen as motivators for public managers

who are motivated by making a contribution to the common good. Bozeman

(2007) agrees with Moore’s claim that public managers are not neutral

competence bureaucrats, but are driven by the opportunity to further their

particular view of the common good. Whereas public value for Moore is the

outcome dimension of public managers’ work, public values for Bozeman can

be antecedents of public service motivation (see Andersen et al., 2012 for a

detailed treatment of the relationship between public service motivation and

public values).

Timo Meynhardt on Public Value Inside

Timo Meynhardt’s public value approach is the third major approach

presented by Bryson et al. (2015a). With a first mention of the term in 2007 (by

Meynhardt and Vaut) and a major conceptual contribution in 2009 (single-

authored by Meynhardt), this approach is also the most recent one. Bryson et al.

(2014, 2015a) point out that Meynhardt’s work on the psychological sources of

public value, while being very important, is less well-known than the other

approaches.

In his major conceptual contribution – an article for a special issue of

the International Journal of Public Administration – Meynhardt (2009) takes a

step back from the public management discourse and asks what the concepts of

“public” and “value” (and “public value”) actually mean. He attempts to answer

these questions and develop a non-normative public value theory by introducing

Introduction

25

concepts from value philosophy, psychology, and economics to the public value

discourse.

As a starting point, Meynhardt gives an overview of the debate on the

ontological status of values, emphasizing the multitude of definitions and the

controversy between value objectivists and value subjectivists. In a nutshell: on

the one hand, value objectivists claim that value is a characteristic of certain

objects that exists a priori independently of an evaluator. On the other hand,

value subjectivists assert that value only comes into being through evaluations

by valuing subjects. Meynhardt synthesizes these competing positions by

drawing on the value philosopher Johannes Erich Heyde, who locates value in

the relationship between an evaluating subject and an evaluated object.

Meynhardt: “By the very act of valuation (or evaluation) a value comes into

being as an abstract entity of desirability or preference.” (2009: 198)

From this definition of value follows an important role of the individual

as an evaluator.3 Therefore, the next question Meynhardt tackles concerns the

basis of evaluations. In other words: what makes individuals evaluate objects in

a particular way? Meynhardt points out that the drivers of evaluation processes

concern emotional-motivational aspects that are captured in psychological

constructs such as needs, motivations, and attitudes. Assuming that the

individual human being is crucial to the understanding of value, a reference

point to human nature is needed.

Meynhardt proposes basic needs theory, because needs drive

individuals and serve as points of reference for evaluations. He specifically

draws on the psychologist Seymour Epstein’s (1989) cognitive-experiential self-

3 Note that Meynhardt does not limit the evaluator role to individuals: “The subject can be a person, a group, a nation, or any other possible entity that is evaluating an object” (2009:

200). For the purpose of this section, we focus on individual evaluators and their basis of

evaluation (psychological basic human needs). In this context, the section “Calling a Public into Existence” can be seen as a discussion of how collective evaluating subjects can be

formed.


26

theory, of which one aspect is a structuring of the basic needs field and a

categorization into four basic needs.

According to Epstein (1989), there are four basic need dimensions:

- positive self-evaluation

- maximizing pleasure and avoiding pain

- gaining control and coherence over one’s conceptual system

- positive relationships with significant others

These four dimensions define an underlying basic needs structure that

can manifest itself quite differently depending on the individual, the cultural

context, and the particular situation. In its most basic form, the need for

maximizing pleasure and avoiding pain takes the form of any organism’s desire

to survive, whereas in a more culturally shaped form it also drives aspects such

as the appreciation of works of arts which the individual “uses” to gain

pleasurable experiences.

Meynhardt translates Epstein’s four basic need dimensions into four

dimensions of public value (moral-ethical, hedonistic-aesthetical, utilitarian-

instrumental, and political social)4. An important implication of basing his

public value theory on Epstein (and not on a hierarchical basic needs theory

such as Maslow’s) is that for Meynhardt there is no a priori hierarchy of public

value dimensions. In a subsequent study on Germany’s Federal Employment

Agency, Meynhardt and Bartholomes (2011) demonstrated the dimensional

structure of public value empirically. This anchoring of public value in human

basic needs is also in line with Moore’s statement (and “first axiom”) that

“value is rooted in the desires and perceptions of individuals” (1995: 52).

These considerations provide a definition of value and a basic

understanding of the psychological structure that drives evaluations on the part

4 See Table 1 in Paper 2 for an overview of the relationship between basic needs and basic

value dimensions.

Introduction

27

of individuals. Having defined value as the quality of the relationship between

an evaluating subject and an evaluated object, we have to enquire about the

object of evaluation.

This is where the notion of a “public” comes in. Again, Meynhardt

takes a psychological approach to defining “the public”. Based on

considerations about society’s perceived complexity – which makes slicing it up

neatly into stakeholder groups impossible – Meynhardt arrives at a view of the

public as an individual’s mental placeholder for community and society. In this

view, “‘the public’ is what individuals perceive as the public” (2009: 205). The

public, then, becomes the object of evaluation by individuals who evaluate the

social collective. Interestingly, this entails “moving the public inside.” The

social collective often intuitively seems to us to be external to the individual, as

it is comprised of more than one individual. Yet, by locating the public inside

the individual, Meynhardt follows the German sociologist Ferdinand Tönnies,

who sees different social collectives as results of different types of mental bonds

(“geistige Verbundenheit”) (Merz-Benz, 2015).

Based on these philosophical, psychological (and sociological)

considerations on the notions of “value” and “the public”, Meynhardt arrives at

the following definition of public value:


28

Public value is value for the public. Value for the public is

a result of evaluations about how basic needs of

individuals, groups and the society as a whole are

influenced in relationships involving the public. Public

value then is also value from the public, i.e., “drawn” from

the experience of the public. The public is an indispensable

operational fiction of society. Any impact on shared

experience about the quality of the relationship between

the individual and society can be described as public value

creation. Public value creation is situated in relationships

between the individual and society, founded in individuals,

constituted by subjective evaluations against basic needs,

activated by and realized in emotional-motivational states,

and produced and reproduced in experience-intense

practices.

Meynhardt, 2009: 212

Neither this definition of public value nor Meynhardt’s (2008)

definition of public value creation is linked to any particular sector or type of

organization. This makes the approach appropriate for the multisectoral

perspective in this dissertation.5 Meynhardt’s approach is also non-normative. It

is not a theory about the impact public administrations, business firms, and other

organizations ought to have on society, but emphasizes their actual public value

creation, resulting from their society-defining role. This non-normativity and the

existence of a validated measurement model (Meynhardt & Bartholomes, 2011)

make the approach particularly suitable for the type of empirical research

conducted for this dissertation.

Having introduced the most important voices in the public value

discourse, we now proceed to a concise overview of the concept’s reception in

academia and practice.

5 Paper 2 is based on empirical evidence from the banking industry, Paper 3 is on the public

sector, and Paper 4 is on FC Bayern Munich, a football club.

Introduction

29

Reception and Criticism

As outlined, public value was partly a response to the neoliberal

Zeitgeist of the 1980s/1990s and can be seen as the public management

approach accompanying third-way thinking. And indeed, it was in Blairist

Britain that the concept was taken up in practice on a broader scale for the first

time (Crabtree, 2004). The first major organization to commit to the concept

publicly was the BBC (BBC, 2004). The BBC’s then Director of Strategy,

Caroline Thomson, declared: “The BBC exists to create public value not only

for individuals as consumers, but also value for people as citizens.” (Thomson,

2006 in Collins, 2007). This is in line with Moore’s (1995) call to distinguish

between clients of a particular public organization and citizens. He warns of an

(NPM-like) overemphasis on customer service and client satisfaction in

evaluating the public sector’s performance and underlines that citizens’ more

impartial judgment should be taken into account.

Overall, the Mooreian public value approach was particularly

successful in countries which had tried NPM before (e.g., Australia and New

Zealand) and were looking for a reorientation towards an approach addressing

NPM’s supposed weaknesses (O’Flynn, 2007). Interestingly, Moore’s work

resonated more strongly in Westminster systems (UK, Australia, and New

Zealand) than in the US, where Moore developed his ideas (Rhodes & Wanna,

2007). In continental Europe, public broadcasting providers used public value

extensively, taking the BBC as a role model (for an overview on public value in

the media, see Karmasin et al., 2011).

The public value approach according to Meynhardt has been employed

by a number of organizations, mainly in German-speaking Europe. The German

Federal Employment Agency uses the approach to understand its social impact

and delivery to its social mission beyond controlling measures (Meynhardt &

Metelmann, 2009; Meynhardt & Bartholomes, 2011; Weise & Deinzer, 2013). It

is also used by the Deutsche Gesellschaft für das Badewesen, the association of


30

public swimming pools in Germany, to sponsor a biannual Public Value Award

for the Public Bath, awarded to the public swimming pools in Germany that

create the most public value (Ochsenbauer & Ziemke-Jerrentrup, 2013).

Meynhardt’s approach is also applied by the private sector. The German stock

exchange has used the Exploring version of Meynhardt’s public value scorecard

to determine its public value (Meynhardt & von Müller, 2013; see also the brief

description of this case in Paper 1; see Meynhardt, 2015 for a description of his

public value scorecard) and the football club FC Bayern Munich has used the

concept to better understand the trade-off it faces between local rootedness and

global growth (Beringer & Bernard, 2013a; also see Paper 4 for an in-depth case

study).6

This short overview of the adoption of public value ideas in practice

shows that the concept was not received identically everywhere, but that the

adoption seems to be highly contingent on cultural and institutional factors. This

is also where Rhodes and Wanna (2007), who published the arguably most

prominent critique of the concept, target their criticism. They argue that

Moore’s concept might be appropriate for the US but that it does not fit

Westminster systems, where officials are not elected and where (two-)party

politics are predominant.

Rhodes and Wanna (2007) claim that Moore puts too much emphasis

on “managerial entrepreneurship” as opposed to “politics” and that giving such

a strong role to (unelected and supposedly neutral) public managers violates

democratic procedures. According to Alford and O’Flynn (2009), such criticism

is based on a misreading of Moore’s work. They point to the strategic triangle

and clarify that politics plays a major role there and is indeed seen as “a

legitimate limit on the public manager’s autonomy to shape what is meant by

public value” (Alford & O’Flynn, 2009: 177). It is also worth noting that Moore

6 For an overview of the practice adoption of Meynhardt’s public value concept, see the articles in Zeitschrift für Organisationsentwicklung, focal topic 04/2013, and for uses of

Meynhardt’s public value scorecard, see Table 10.3 in Meynhardt, 2015: 158 -159.

Introduction

31

acknowledges the cultural contingency of his ideas when he includes the

following disclaimer at the beginning of his theory formulation: “And it may be

that the appeal of such ideas owes more to their fit with cultural trends and

organizational aspirations of the Kennedy School than to their truth and utility

outside the cultural context in which they were developed.” (1995: 8)

Having given an overview of the major theoretical approaches in the

public value research field in public management and on the reception and

practical applications of the concept, we can now turn to the issue of (re-

)discovering society for strategic management. The neglect of societal issues in

strategic management (and the neglect of strategic issues in the business and

society field) will be presented as our major motivation for enquiring into

strategic aspects of public value management.

STRATEGY AND SOCIETY

Society as an Important Environmental Factor

Strategic management is concerned with positioning organizations in

their environment (Nag et al., 2007). In his influential book Competitive

Strategy, Michael Porter claims: “The essence of formulating competitive

strategy is relating a company to its environment” (1980: 3). He argues that “the

key aspect of the firm’s environment is the industries in which it competes”

(1980: 3). Industry-centric approaches to strategic management, for instance

Porter’s, focus on external factors such as market competition, the negotiation

power of suppliers and customers as well as threats from product substitutes and

new market entrants (Porter, 1980). Other major theoretical approaches to

strategic management emphasize organization-internal factors such as an

organization’s set of valuable resources (Barney, 1991), knowledge (Nonaka,

1994), or dynamic capabilities in adjusting the resources and knowledge to


32

changes in the external environment (Teece et al., 1997) to answer the question

why some firms perform better than others.

A crucial factor that is not included in such models is organizations’

embeddedness in a range of societal subsystems. Organizational activity is at

once subjected to efficiency, instrumental performance, moral-ethical, legal,

political, and even aesthetical evaluations (Meynhardt, 2009). Especially for the

business firm, the market environment is clearly a crucial part of an

organization’s surroundings, but also quite clearly not the only one.

Business shapes society and has caused and contributed enormously to

changes in the organization of society. Think about what the Ford Model T

(introduced in 1908) did to mass mobility or what Facebook (introduced in

2004) did to communication and the very notion of “friendship.” Such

organizations and products are society-changing. Firms influence shared values

in society not only by what they produce, but also by how they act,

communicate, and market their products.7 This impact of firms on society

includes, but is not limited to, what economists call “externalities” (Papandreou,

1994; Mankiw & Taylor, 2006). Drucker (1992) used the term “new society of

organizations” to describe organizations’ disruptive effects for traditional social

structures in the knowledge society and points to the outstanding role of

managers in resolving them:

7 The FC Bayern case in this dissertation (Paper 4) is an example where what one would define as the core business – compiling a team of football players and letting them compete

in national and international tournaments – only represents a (small) part of the

organization’s impact on societal values. An insight from the case is that immaterial public

values such as “Societal fair play” or “Community through polarization” depend on which

values the organization stands for publicly and how these are communicated . To mention

another example: a recent commentary in the New York Times about Volkswagen’s Dieselgate scandal also points to the public value damage as the actual major damage that

was done: “But the matter is not just about jobs, market share or corporate and bureaucratic

reputations. The scandal captures Germany at a moment when it has been trying to hold on to values it always saw as defining, but that have become increasingly difficult to maintain as it

becomes drawn into the messy problems of Europe and the world” (Smale , 2015).

Introduction

33

… the tension created by the community’s need for stability

and the organization’s need to destabilize; the relationship

between individual and organization and the

responsibilities of one to another; the tension that arises

from the organization’s need for autonomy and society’s

stake in the Common Good; the rising demand for socially

responsible organizations; the tension between specialists

with specialized knowledge and performance as a team. All

of these will be central concerns, especially in the

developed world, for years to come. They will not be

resolved by pronunciamento or philosophy or legislation.

They will be resolved where they originate: in the

individual organization and in the manager’s office.

Drucker, 1992: 96

As the examples indicate and Drucker’s quote underlines, organizations

can disrupt social structures. Nevertheless, the relationship runs both ways. As

much as societal structures can be vulnerable to corporate actions, firms are

dependent on a “license to operate” (Nielsen, 2013) from society. This includes

“hard” factors such as regulation as well as “soft” factors such as a firm’s

perceived legitimacy (Suchman, 1995) or reputation (Fombrun, 1996). Pfarrer et

al. (2010) point to the still underresearched effects of such “social approval

assets.” Micklethwait and Wooldridge remind us that “[t]o keep on doing

business, the modern company still needs a franchise from society, and the

terms of that franchise still matter enormously” (2003: 186). They are explicit

about corporations’ continued dependence on favorable societal operating

conditions when they claim that “[t]he problems in the future may stem less

from what companies do to society than from what society does to companies”

(2003: 190). Evidently, social approval of business activity is an important asset

which can decisively shape the strategic environment.


34

Two Research Communities that Barely Talk

Walsh et al. (2003) point out that the original mission statement of the

Academy of Management declares management scholarship to be committed to

the advancement of both the economic and social objectives of society. As the

discussion above shows, social issues and “social approval assets” are central to

business success and it seems logical to say that every organization, be it a firm,

a public administration or a non-governmental organization (NGO), is

intertwined with the society around it as any organizational action, including

economic action, is embedded in a broader social context (Granovetter, 1985).

Yet, such thinking has not been of central interest to research in management

recently. As Walsh et al. (2003) put it:

The public interest – as distinct from the private interests

of capital and labor – holds a tenuous place in

management scholarship; the social objectives of society

have not received equal attention in our work.

Walsh et al., 2003: 860

“Business and society” (Schwartz & Carroll, 2008) has developed as a

subfield that deals with the role of business and society under such terms as

“corporate social responsibility” (Carroll, 1991, 1999), “business ethics” (Crane

& Matten, 2007) or “stakeholder management” (Freeman, 1984; Freeman et al.,

2004). Stakeholder theory assumes that several individuals and groups have an

interest (“a stake”) in a firm, and this has to be taken into account in managerial

decision-making. The stakeholder view is frequently contrasted with a

shareholder value orientation (Freeman, 1984; Sundaram & Inkpen, 2004). In

the discussion section below, we identify the need for further research on public

value and stakeholder theory, as the stakeholder concept is very popular in the

business and society field (Schwartz & Carroll, 2008) and as stakeholder issues

feature in different papers of the dissertation.

Introduction

35

The mentioned approaches from the business and society field see

themselves in opposition to mainstream management scholarship and are

located “at the periphery” of the research community (Walsh et al., 2003).

Walsh et al. (2003) therefore argue that there is not enough interaction and

communication between “mainstream” management scholars and scholars that

work in the business and society field. The latter often focus their work solely

on negative effects (e.g., working conditions in developing countries) and fringe

activities (e.g., corporate volunteering).

However, firms are value-creating and productive social systems

(Ulrich, 1968) that can have disruptive effects on the organization of society that

extend beyond the issues that are commonly associated with corporate social

responsibility, business ethics, or sustainability. A theoretical approach to

grasping their role in society from a strategic perspective needs to do justice to

their value-creating core. The aforementioned approaches from the business and

society field are therefore not suitable candidates for furthering our

understanding of a societal dimension in strategic management. We outlined

that the major strategic management theories neglect societal issues. In contrast,

this paragraph showed that the major business and society theories lack a

strategic perspective that is aligned with firms’ core business. We therefore

formulate a need to identify a theory that is able to deal with organizations’

societal embeddedness from a strategic vantage point.

Porter and Kramer on Strategy and Society and Creating Shared Value

In a similar vein, in their article Strategy and Society: The Link

Between Competitive Advantage and Corporate Social Responsibility, Michael

Porter and Mark Kramer (2006) argue that companies’ efforts to be more

socially responsible are unproductive because they are detached from strategic

considerations. They call for an increased awareness of the reality that business

and society are dependent on each other and provide ideas around how to

identify “social issues” stemming from “inside-out” as well as “outside-in”


36

linkages. They map these linkages on Porter’s classic models of the Value Chain

and the Five Forces Framework. One might argue that their description of

bilateral business and society linkages is rather mechanistic, overly focused on

material economic aspects, and does not do justice to the systemic nature of

social embeddedness (see Paper 5 on embeddedness and value co-creation).

Nevertheless, Porter and Kramer’s bottom line, that societal issues in business

ought to be treated as strategic issues (and vice versa) is very much within the

spirit of this dissertation’s argument and underlines the need for a theoretical

approach to tackle these issues.

With their Creating Shared Value concept, Porter and Kramer (2011)

provide an approach which is supposed to move societal issues from the “social

responsibility periphery” to the center of strategic management attention.

According to Porter and Kramer (2011), companies should look for

opportunities where they can create economic value and value for society

simultaneously. Companies can tap this potential by exploring new markets at

the bottom of the pyramid, by making their processes more efficient in a way

that also reduces externalities, and by fostering productive clusters of suppliers

that benefit both the company and the suppliers. Leaders of major multinational

corporations responded enthusiastically to the concept (Paul Polman of Unilever

repeatedly committed in public to doubling the company’s shared value creation

and Nestlé publishes an annual report on Creating Shared Value).

Nevertheless, the concept also spurred debate (Strathoff, 2013),

attracted ardent criticism from established scholars in the business and society

field focused on its supposed unoriginality and neglect of trade-offs (Crane et

al., 2014), and was even ridiculed in The Economist’s Schumpeter column

(2011) as “a bit undercooked.”

Introduction

37

EXTENDING PUBLIC VALUE TO OTHER SECTORS

We have identified the need for a theoretical approach to grasp

organizations’ societal embeddedness from a strategic perspective. In this

dissertation, we attempt to deal with the need of incorporating a societal

dimension into strategic management by employing the public value concept to

management issues of public as well as private sector organizations.

In this paragraph, we demonstrate with three lines of argument why a

theory transfer from public to private sector management is appropriate. First,

we draw on Bozeman’s theory of dimensional publicness, which posits that

publicness is a property of government as well as business organizations.

Second, we describe Selznick’s argument about the value-infused nature of

institutions, which applies to all types of large organizations – public and

private. Third, we present an empirical argument about the increased blurring of

sectors, resulting from privatizations and social demands being increasingly

addressed at business organizations, subjecting the latter to the rulings of the

court of public opinion.

All Organizations are Public

Building on his critique of market failure approaches to define the

public sector’s tasks and responsibilities, Barry Bozeman argues that

organizations are not either public or private, but can be more or less public,

depending on “the degree of political authority constraints and endowments

affecting the institution” (2007: 8). This dimensional publicness approach

acknowledges that there are fundamental differences between private sector and

governmental organizations.

Both types can be more or less public and in some instances private

sector business organizations might be more public than particular government

organizations (Bozeman, 2007). This is captured in the title of Bozeman’s 2004


38

book All Organizations are Public. We also observe a blurring of sectors, where

business and government organizations are becoming increasingly similar in

their approach to management, visibility to the public as well as tasks to

perform (Bozeman, 2004). Thus, we do not view publicness as a feature that is

exclusive to government sector organizations, but as a gradual property of all

types of organizations. It therefore seems sensible to employ the public value

approach to strategic management – which is built around the idea that

organizations have a public role that needs to be managed – to private sector

business firms as well.

The Value-Laden Nature of Institutions

A second argument for the applicability of the public value concept to

other sectors’ strategic issues (especially in the business sector) can be made by

drawing on Selznick’s (1957, 1992) work on institutions. Philip Selznick, a

communitarian sociologist and philosopher, sees institutions as shapers of social

collectives because they give normative order and are valued by individuals due

to their particular place in a social system. He explains that institutions are more

than rational instruments to fulfill particular tasks, but are places for the

realization of values. This converges in his famous dictum that “‘to

institutionalize’ is to infuse with value beyond the technical requirements of the

task at hand” (1957: 17 [emphasis in original]).

For Selznick, organizations become institutions when they develop

their own culture with coherent values and become an integral part of the

surrounding community. Selznick underlines that all sorts of large and durable

organizations carry features of institutions, as they all develop self-defining

values to a certain degree. The fact that for Selznick all large organizations carry

institutional features, or in his words are “vehicles for meaningful, self-

affirming participation” (1992: 243), makes us confident that in the realm of

values a concept from public management might well be applied to business

management issues.

Introduction

39

Selznick (1992) also argues that it is a misconception of the business

enterprise to see it as an instrumental and fully rational economic system to be

organized around a profit-maximization doctrine. Corporations are in fact social

as well as economic institutions. From this assertion flows a notion of corporate

responsibility that is closely linked to a corporation’s behavior in its core

business. In Selznick’s words: “Philanthropy is morally proper and legally

permissible, but it is not at the center of moral responsibility” (1992: 350).

This position underlines the need for viewing societal issues from a

strategic perspective that is closely aligned with the core business of the

corporation. This need represents the central motivation of this dissertation’s

attempt to approach strategic issues from a public value perspective. Selznick

explicitly connects management and the long-term survival of corporations to

public interest ideas when he states that “[i]n the large complex corporation,

what constitutes such a long-run benefit is most likely to be obvious. It requires

an assessment more akin to defining the public interest than to any tight

managerial logic” (1992: 350). The institutional properties of corporations –

being value-infused vehicles for individuals’ meaningful participation – increase

our confidence to apply the public value concept to strategic management issues

in the private sector.

Blurring Sector Boundaries and the Court of Public Opinion

Our third argument for the applicability of public value for private

sector management issues is empirical: we observe a blurring of sector

boundaries which results in some public sector organizations becoming more

like businesses, and vice versa. A driver of this development is the wave of

privatizations of infrastructure and former government services that started in

the UK in the 1980s. Several services considered to be in the public interest

have since been contracted out and are delivered by the private sector

(Micklethwait & Wooldridge, 2003). At the same time, business has

dramatically increased its financial and organizational capacities relative to


40

government. Therefore, demands for solving public problems are increasingly

directed at the private sector (Moore & Khagram, 2004).

Consequently, societies have found a lot of ways to call business to

account which do not involve governmental action. Think of NGOs’ powerful

naming and shaming campaigns or journalists’ power in shaping the reputation

of large corporations. Moore calls this the court of public opinion, which he

defines as “an interested public composed of many different kinds of social

actors who seek to impose external accountability on large, powerful

organizations” (2014b: 633). The focus, clearly, is on “organizations”, which

encompasses the private and public as well as the non-profit sector. Moore

(2014b) explains that this assertion calls for a legitimacy perspective where the

appropriateness of an organization’s behavior is determined by public judgment

(Yankelovich, 1991), as opposed to a limited group of self-proclaimed

accountability agents (Moore’s notorious “three kooks and a fax machine”).

Further, Moore and Khagram (2004) underline that societal issues – even

though quite often not included in business strategy – are de facto taken

seriously by firms, as evidenced by the existence of dedicated public affairs,

CSR, or community relations departments. Moore and Khagram (2004) see this

as evidence for the applicability of Moore’s strategic triangle to private sector

management in general and of the importance of the legitimacy and support

perspective in particular.

Taking all three arguments – Bozeman’s All Organizations are Public,

Selznick’s value-laden nature of institutions, and Moore’s blurring sector

boundaries – into account, we are confident in applying Meynhardt’s public

value concept, which has its roots in the public management literature (see

above), to strategic management issues in both the public and private sector.

Introduction

41

PUBLIC VALUE IS WHAT THE PUBLIC VALUES

Assuming a public value perspective on strategic management implies

that we give a huge role to the public’s judgements about organizations’

contribution to the common good. As Talbot (2006: 7) put it: “Public value is

what the public values". Following the logic of Meynhardt’s (2009) public value

theory, outlined above, public value is always the result of an evaluation process

where the public evaluates whether organizational action contributes to the

common good.

A major theoretical contribution of Meynhardt’s (2009) psychology-

based theory is to “move” the public inside. This is evident in his definition:

“The ‘public’ – psychologically speaking – is an individually formed abstraction

generated on the basis of experiences made in daily practices, analytical insight,

and all sorts of projections as to complex phenomena” (Meynhardt, 2009: 205).

Meynhardt (2009) underlines that such a mental conception of “a whole” is

necessary in complex societies, where it is simply impossible to identify and

manage all stakeholders. Values and the public as a mental conception of the

social collective are then vehicles for the individual to make sense of the

environment. This dissertation subscribes to this definition of public value, as is

evident in the conceptual discussions on value creation (Paper 1) and valuing

dynamics (Paper 5) as well as the methodological choices in the qualitative

(Paper 4) and quantitative (Papers 2 and 3) empirical papers.

Despite the theoretical focus on (individual) psychological processes of

valuing and seeing the public as a mental conception (and public value as a

resource for the individual), public value is essentially a theory about what

society as a whole regards as valuable and how organizations can contribute to

this common good. In this view, which makes the perspective more “macro”,


42

the evaluating subject is the public, whereas the evaluated object is the common

good, respectively the contribution of organizations to the common good.8

This leads to two sets of questions: First, we will discuss how a

“public” can come into being. This includes questions about processes of public

deliberation and the emergence of a “public opinion”. Second, we have to ask

how the common good can be defined and measured. This includes a discussion

of how organizations contribute to the common good. The two questions can

also be understood as touching on a process (calling a public into existence9)

and an outcome (common good) dimension. Moore (2014a) proposes a similar

dimensionality in his “degress of publicness” framework. He distinguishes

between “arbiters of value” and “valued objects”, which can both be more or

less public. For Moore, the “most public” question to ask when valuing social

conditions is: “How do we citizens want to use the powers of government to

create a good and just society?” (2014a: 468)

For analytical reasons we will keep both questions – about calling a

public into existence and about defining the common good – separate. These are

both major questions of philosophy and political theory and it is certainly not

this introductory chapter’s intention to contribute to answering them. Yet, it will

be useful to outline some thoughts which will help the reader to understand how

this dissertation’s results and discussions around the societal perspective in

strategic management relate to broader questions.

8 In this sense, the “public” in Meynhardt’s (2009) theory has a dual role. As outlined, it

refers to individuals’ mental conception of community and society. In this sense, it can be

seen as the evaluated object. Through the idea that evaluations are made by a public

composed of more than one individual, the public also assumes the role of the evaluating subject. Interestingly, Moore (2014a) adopts a similar structure, where an increasing “degree

of publicness” is derived from both “the arbiters of value” as well as the “valued objects.” 9 The term “call into existence a public” was actually coined by Dewey (1927). Moore (1995, with Fung, 2012) frequently uses the expression when referring to what he calls “political

management.”

Introduction

43

CALLING A PUBLIC INTO EXISTENCE

The first question asks how a collective (that is more than a mere

“collection” of individuals) comes into being. Put differently: how can

individuals come together and decide what they as a whole regard as valuable?

This concerns emergent properties of valuations, where the sum is not only

more than, but also different from the addition of the parts.

The Rawlsian Veil of Ignorance – Public Through Ignorance

In his opus magnum A Theory of Justice (1971), the political

philosopher John Rawls proposed one (hypothetical) way of organizing such

processes. Rawls is concerned with deriving principles on which the institutions

of a just society could be built.10 Following a contractarian tradition of

reasoning, Rawls proposes the thought experiment of an original position, in

which the individuals to form a society come together and deliberate about the

principles on which their society’s institutions ought to be built.

The decisive feature of this original position is the veil of ignorance,

which Rawls defines as a situation in which the parties “do not know how the

various alternatives will affect their own particular case and they are obliged to

evaluate principles solely on the basis of general considerations” (1971: 136-

137). Rawls argues that “a conception of justice is to be the public basis of the

terms of social cooperation” (1971: 142). In a way, the Rawlsian approach

constitutes the creation of a public through ignorance. It is implicitly based on a

conception of humans being narrowly self-interested and only being able to

think in terms of the public interest once their knowledge about their position in

society is erased, respectively hidden behind the veil of ignorance.

10 Here, we focus on the process that drives the Rawlsian thought experiment and not on the

outcome. There has been a fair amount of criticism of the two principles at which Rawls

arrives and also on the importance he attributes to institutions (as opposed to actual human behavior). See Amartya Sen’s The Idea of Justice (2009) for a comprehensive (and

appreciative) criticism of Rawls’ approach.


44

Moore’s Political Marketplace – Public Through Representative

Democracy

Moore (1995) refers to the Rawlsian conception in terms of

philosophical foundations. Yet, he also provides ideas about how public

deliberation processes take place in reality and how they fit into his public value

approach. Moore starts his discussion of public deliberation processes by putting

a problem on the table: Whereas the fact that people are willing to pay for

private sector products indicates that they regard them as valuable, such an

indication is not available for (most of) the public sector’s products because the

latter’s production is funded by (coercive) taxation.

Moore argues that despite the absence of an economic marketplace, it is

in the political marketplace that resources are made available for the public

sector. He acknowledges that representative democracy is not perfect for calling

a public into existence that can articulate which public values ought to be

produced. Nevertheless, Moore points out that the “processes of representative

democracy come as close as we now can to creating the conditions under which

individuals can voluntarily assemble and decide collectively what they would

like to achieve together […]” (1995: 30). Moore and Fung (2012) argue that

political management cannot rely on elections and formal representative

mechanisms alone, but that public managers have to engage in consultative

processes to build legitimacy for their actions. However, “delegating” public

engagement to the representative political process is only an option for public

sector organizations (and limited to democratically organized polities).

Public Opinion and Judgment as an Emergent Phenomenon

Another way of thinking about how a public can come into being that is

more than the mere sum of the individuals is to focus our attention on the public

opinion. We then do not need to devise thought experiments where individuals

are taken away (part of) their knowledge or rely on processes that are only

Introduction

45

applicable in particular contexts. Public opinion is a case in point for a public

coming into existence that is different from the sum of the individuals: Public

opinion can be relatively stable and seemingly independent from particular

individuals who change their mind. Yet, the general “mood” can also change in

ways that cannot simply be explained by a large number of individuals having

adjusted their opinion.

Yankelovich (1991) sees public opinion as a value-laden form of

knowledge. He is confident about the public opinion and argues that experts

have gained too much influence on policy-making, which is erroneously seen as

a predominantly technical exercise. He clarifies that what he calls “public

judgment” is much more stable than what is commonly understood by the

volatile “public opinion”.11 Yankelovich is explicit that in the domain of values,

public judgment deserves more attention than seemingly rational expert opinion:

One can readily see that the dominance of instrumental

rationality as a world view is ill-suited to the domain of

human concerns – the everyday world of human bonds,

beliefs, and feelings, in which love, loyalty, politics, family

relations, and friendship shape a moral life. That is the

domain of public judgment, the domain of values.

Yankelovich, 1991: 186

The emergence of public judgment as a collective perspective out of

individual evaluations can be understood by employing the principles of

synergetics after the physicist Hermann Haken (1984, 1993). Synergetics entails

a circular process of bottom-up “emergence” and top-down “enslavement.”

11 Interestingly, in this respect, Yankelovich’s (1991) conception of public judgment comes

very close to Bozeman’s (2007) delineation of “public opinion” and “public values.”

Bozeman points out that “the distinction is one of temporal duration. Whereas public opinion is highly volatile, both in its concerns and in its directions, public values are much more

stable.” (2007: 14)


46

Paper 5 includes a detailed description of synergetics and how it can be applied

to value co-creation processes in service ecosystems.

Synergetics is a formal theory about the behavior of self-organizing

systems. The theory is independent from any particular social scientific

discipline (and its underlying assumptions). This makes it an appropriate

formalized apparatus to study the link between micro- and macro-levels in

general (Meynhardt, 2004) as well as the link between individual perceptions

and evaluations and public judgment in particular. Viewing the question of how

to call a public into existence from a synergetics perspective is therefore less a

programmatic call to start participatory processes or a “how to” for deliberative

exercises. Instead, it is an attempt to better understand and structure the

systemic properties of such processes.

Introduction

47

THE COMMON GOOD AS A SYSTEMIC PROPERTY

Meynhardt’s (2009) public value approach clearly locates the ontology

of contributions to the common good (i.e. public value) in individual cognitive-

emotional processes. In this view, public value cannot be created without

individual appraisal. There is no such thing as “objective” public value creation

that has just not yet been “discovered.” From this follows that there is no such

thing as a common good that can be defined objectively by relating to some

broader system (religion, ideology, or presumed expertise). It is tempting to

argue that from this theoretical provision follows a view of the common good as

the mere sum of preference satisfaction for self-interested individuals.12

Meynhardt and Gomez (2015a) argue that the common good can neither be

defined as the sum of individual interests being satisfied nor as an “objective”

macro-property which can be defined without taking individuals into account.

Instead, they propose a functional definition of the common good. In

their view, the common good is a mechanism in large groups without which

sociality is not possible. They explain that a functioning society needs an idea of

the common good, which links the individual to the collective. By adding a

psychology of needs perspective to the common good discourse, Meynhardt and

Gomez (2015a) confront the collective common good level with the human

condition and relate it to each other.

Such a definition of the common good resonates with Selznick’s (1992)

discussion of the term. Selznick rejects Bentham’s crude utilitarian view of the

common good and advocates a more systemic perspective, which takes into

12 This view of the common good is narrow in two ways: First, it limits human motivation to

a notion of “interest,” which seems overly rationalist and calculating. Second, it assumes that

the overall state of a social system can be understood by adding up its parts and thereby neglects systemic properties. Complexity research shows that systems can behave in ways

that are not at all predictable by observing the behavior of the parts (Holland, 2014).


48

account that individuals are embedded in a social collective which is “real” in

individuals’ experience as they derive value from it13:

We may well agree that groups are composed of individual

persons and that the well-being of persons is the final

criterion of morality and utility. This does not, however,

settle what constitutes well-being or what it depends on.

Personal well-being requires moral competence, which

includes loyalty, trust, and other group-centered virtues,

and it depends on group participation, nurture, and

support. Therefore, from the standpoint of the individual

the community is hardly ‘a fictitious body.’ Both the

opportunities it offers and the constraints it imposes have a

vivid reality.

Selznick, 1992: 53614

In this view, the common good is a property of social collectives that

cannot be limited to the satisfaction of individual interests (or preferences, as

economists would say). This does not mean that the common good is something

abstract that can be defined or “found” without taking the individual into

account. It is again Selznick who puts the idea in a nutshell: “The alternative [to

a focus on individuated satisfaction P.S.] is to think of the common good as

more profoundly systemic, not reducible to individual interests or attributes, yet

testable by its contribution to personal well-being” (1992: 537 [emphases in

original]).

Meynhardt’s public value approach, which is the theoretical

perspective of this dissertation, subscribes to this communitarian (and

functional) understanding of the common good. Whereas Selznick’s focus is on

13 It is based on an understanding of the individual being dependent on a social collective to

flourish (even for the development of an – individual – identity), that Meynhardt claims: No

freedom without common good - Ohne Gemeinwohl keine Freiheit (Meynhardt, 2014). 14 The term “a fictitious body” is put in quotation marks in Selznick’s original text, as he is

referring to Bentham’s use of the term.

Introduction

49

political philosophy and social theory, Meynhardt emphasizes the contribution

of organizations to the common good and the managerial consequences thereof.

This dissertation is firmly embedded in Meynhardt’s public value perspective

and aims to make a contribution by relating public value ideas to different issues

of strategic management.

THE GEMEINWOHLATLAS – PUBLIC VALUE ATLAS

This dissertation is one result of a unique research project – The

GemeinwohlAtlas (Public Value Atlas). For the GemeinwohlAtlas, a public was

called into existence by having representative samples of the Swiss and German

populations evaluate major organizations’ contribution to the common good, i.e.

their public value. The collected data is presented online in an accessible way to

allow discussions about organizations’ contribution to the common good and

their role in a functioning society (see www.gemeinwohl.ch and

www.gemeinwohlatlas.de). Besides this important function for public debate,

the GemeinwohlAtlas also represents a unique dataset on public value creation

and related variables. Papers 2 and 3 of this dissertation are based on data

collected in the first Swiss GemeinwohlAtlas survey in 2014. More detailed

information on the process of data collection, determining samples of

organizations as well as respondents, and the measurement scales chosen are

included in the respective papers.

The idea of the GemeinwohlAtlas is in line with Meynhardt’s public

value theory, because a public (evaluating subject) is created (by having a

sample of the population take the online survey and by presenting the results

publicly) to evaluate how major organizations contribute to the common good

(evaluated object). Meynhardt and Gomez (2015a) underline that one has to ask

individuals about their evaluations when they state: “What else could serve as

the thermometer for the state of society?”


50

Having given an overview of public value theory and its theoretical

context as well as of the GemeinwohlAtlas as the dissertation’s main source of

data, we now proceed to a synopsis of the five papers.

TABLE 1:

Overview of the five papers

No. Title Author(s) Type Conference Presentation Publication

1 The VBA Model and Public Value:

Filling the Value Gap

Pepe Strathoff Conceptual Association of Business in

Society Doctoral Summer

School 2013, Academy of

Management Annual Meeting

2014

Business and

Professional

Ethics Journal

33(4)

2 Public Value Commons: Evidence

from the Swiss Banking Industry

Timo Meynhardt, Pepe

Strathoff, & Steven A.

Brieger

Quantitative - tbd

3 Public Value and Happiness:

Evidence from Public

Administration in Switzerland


Strathoff, & Steven A.

Brieger

Quantitative International Symposium on

Public Sector Management 2015,

Academy of Management

Annual Meeting 2015

tbd

4 FC Bayern Munich: Creating

Public Value Between Local

Embeddedness and Global Growth


Strathoff, Lorenz Beringer,

& Sebastian Bernard

Qualitative - The Case Centre

Teaching Case

5 Systemic Principles of Value Co-

Creation: Synergetics of Value and

Service Ecosystems

Timo Meynhardt, Jennifer

D. Chandler, & Pepe

Strathoff

Conceptual Academy of Management

Annual Meeting 2014

Journal of

Business Research

69(8)


52

OVERVIEW OF PAPERS

Table 1 gives an overview of the five papers that compose this

dissertation. They provide five different yet theoretically connected perspectives

on issues of strategic management and society. Figure 1 illustrates the structure

of the dissertation.

FIGURE 1:

Structure of the Dissertation

The three empirical papers at the core of the dissertation deal with three

phenomena – industry patterns, performance measurement, and growth – that

are central to strategic management from a public value perspective. They are

framed by two conceptual papers which discuss public value in relation to other

Paper 1The VBA Model and Public Value:

Filling the Value Gap

Paper 5Systemic Principles of Value Co-Creation:

Synergetics of Value and Service Ecosystems

Paper 2

Public Value Commons:

Evidence fromthe Swiss Banking Industry

Paper 3

Public Value and Happiness: Evidence from

Public Administration in Switzerland

Paper 4

FC Bayern Munich: Creating

Public Value Between LocalEmbeddedness

and Global Growth

Introduction

53

business and society paradigms and public value as an emergent order parameter

from a value co-creation perspective.15

Paper 1:

The VBA Model and Public Value: Filling the Value Gap

The central idea of the first paper, which is a conceptual piece, is to

discuss the predominant understanding of value creation in the business and

society field and to present public value thinking as an approach to extend the

notion of business’s value creation for society. The paper draws on Schwartz

and Carroll’s (2008) value balance accountability (VBA) model. This model

identifies value creation as an essential element of the business and society field.

The paper critically evaluates Schwartz and Carroll’s (2008) value notion and

proposes Meynhardt’s (2009) public value approach as a way of tackling the

identified gaps.

Public value enables a holistic capturing of value creation for society,

as it takes multiple dimensions of value creation into account and is not limited

to material and instrumental aspects. It also adds specificity, as due to its

anchoring in psychological basic human needs it has a microfoundation (Barney

& Felin, 2013) and a stable basis to derive its claims, providing a quasi-ontology

(Meynhardt & Gomez, 2015b). The paper includes a short discussion of how the

insertion of public value into a combined public value-balance-accountability

model changes the understanding of accountability and requires a broader

notion of accountability, including heightened value awareness (Gomez &

Meynhardt, 2012).

15 Note that in line with the cumulative format of this dissertation, all five papers are

included in the dissertation following the format guidelines of the respective (target)

publication outlets. However, some layout adjustments were made to enhance readability and presentation. This introductory chapter follows the Academy of Management Journal’s style

and citation guidelines.


54

Earlier versions of this single-authored paper were presented at the

2013 Doctoral Summer School of the Academy of Business in Society in

Lüneburg and at the 74th Annual Meeting 2014 of the Academy of Management

in Philadelphia. The paper was published in 2015 in a special issue of the

Business & Professional Ethics Journal.

Paper 2:

Public Value Commons: Evidence from the Swiss Banking Industry

The second paper deals with industry patterns in public value creation.

Competitive dynamics in industries are a classic research topic in the strategic

management field and Porter (1980) has prominently claimed that the industry a

firm competes in is the most important environmental factor. Paper 2 is

empirical, and based on data from the first Swiss GemeinwohlAtlas of 2014. We

take the banking industry subset of this dataset to show the effect of the industry

public value and of respondents’ familiarity with a particular firm on that firm’s

public value. We find that both variables have a significant influence on public

value: The better (worse) one’s public value evaluation of the banking industry,

the better (worse) one’s evaluation of individual banks. Also, the more familiar

respondents are with a particular bank, the better they evaluate that bank’s

public value. The influence of industry public value is particularly strong for the

major private banks (UBS and Credit Suisse) and is not weakened even if the

respondent is more familiar with the bank.

The paper contributes to the public value literature as the first study on

industry patterns in public value creation. It makes a theoretical contribution by

analyzing parallels and differences between public value (Meynhardt, 2009) and

the seemingly similar construct of organizational reputation (Fombrun &

Shanley, 1990; Lange et al., 2011). An important implication for practice based

Introduction

55

on the findings is that cooperative approaches to manage public value at the

industry level are more promising than firm-level competitive approaches.

The paper is written in co-authorship with Timo Meynhardt and Steven

A. Brieger.

Paper 3:

Public Value and Happiness: Evidence from Public Administration in

Switzerland

Paper 3 is also empirical, and based on data from the Swiss

GemeinwohlAtlas of 2014. It attempts to connect the field of happiness research

in economics (cf. Frey & Stutzer, 2002), where institutions have been found to

be an important factor in explaining people’s life satisfaction, with research in

the public administration field that investigates the broader impact of public

organizations on society (i.e. public value, Meynhardt, 2009). With data from

the GemeinwohlAtlas we can (partly) reconstruct the standard happiness model

(cf. Frey & Stutzer, 2002) with individual-level variables such as age, sex,

income, and marital status. To this model, we add an individual’s public value

evaluation of the public administration in Switzerland. We find that the public

value evaluation of public administration indeed has a positive influence on life

satisfaction (happiness). We also show that the extended model fits the data

significantly better than the standard happiness model.

Both happiness and public value are subjective measures of quality of

life and public sector performance, respectively. We have included a discussion

on the need for future research that takes “objective” measures of public sector

performance (Schachter, 2010; Behn, 2014) and their impact on life satisfaction

into account. We conclude that the findings emphasize an underlying key idea

of the public value research program: rediscovering public administration as a

positive force for society at large.


56

The paper is co-authored by Timo Meynhardt and Steven A. Brieger. It

was presented in an earlier version at the 15th International Symposium on

Public Sector Management in Hamburg in 2015 and at the 75th Annual Meeting

of the Academy of Management in Vancouver in 2015.

Paper 4:

FC Bayern Munich: Creating Public Value Between Local Embeddedness

and Global Growth

The fourth paper is a case study on the football club FC Bayern

Munich. It deals with a phenomenon central to strategic management – growth.

The case study depicts how FC Bayern Munich – a small organization by

objective measures; a society-maker by its actual impact – dealt with tensions

arising from its rapid global growth by employing the public value scorecard in

its Exploring version (Meynhardt, 2015). The case is not written as a case study

in the methodological sense (cf. Yin, 2009), but as a teaching case that recounts

how the club management became aware of tensions and how these were

mapped and analyzed by means of the public value scorecard. These tensions

included the European Championship 2012 in Poland and (then dictatorial)

Ukraine as well as the introduction of access control in parts of the club

stadium. The case is based on qualitative empirical research on the public value

of FC Bayern Munich that was carried out by Lorenz Beringer and Sebastian

Bernard (Beringer & Bernard, 2013a; 2013b). It also demonstrates how an

organization deals with ambidextrous challenges (Birkinshaw & Gupta, 2013),

in this case the trade-off between local rootedness and global ambitions.

The paper is co-authored by Timo Meynhardt, Lorenz Beringer, and

Sebastian Bernard. It is available in the collection of The Case Centre

(document no. 215-131-1) with a corresponding teaching note (document no.

215-131-8).

Introduction

57

Paper 5:

Systemic Principles of Value Co-Creation: Synergetics of Value and Service

Ecosystems

Paper 5 is a conceptual piece on systemic dynamics in service

ecosystems. The paper assumes a service dominant-logic (SD-logic) perspective

(Vargo & Lusch, 2004) with a focus on service ecosystems (Lusch & Vargo,

2014). It is argued that the understanding of value co-creation in service

ecosystems can be furthered by employing a systemic perspective, where value

is seen as a systemic property. We propose to employ synergetics (cf. Haken,

1984, 1993) with its core principles of emergence and enslavement to unravel

the complexities of the systemic interplay between individual value (micro-

level) and collective value (macro-level). Accordingly, we introduce nine

systemic principles of value co-creation (cf. Ebeling & Feistel, 1994) and

illustrate these with vignettes from the failed market introduction of New Coke

in the 1980s. The paper thereby contributes to a better understanding of the

interplay between customer value and public value. The assumed perspective

can contribute to making sense of changed control parameters (increasing

embeddedness, acceleration, and moralization of markets) and their impact on

service ecosystems in future research.

The paper is written in co-authorship with Timo Meynhardt and

Jennifer D. Chandler. An earlier version of the manuscript was presented at the

74th Annual Meeting of the Academy of Management in Philadelphia in 2014.

The paper was published in 2016 in a special issue of the Journal of Business

Research.


58

DISCUSSION

This section discusses overarching implications and the potential for

future research of the dissertation as a whole. Each paper (excluding the FC

Bayern case study) has a discussion section with research and practice

implications of the paper’s findings in the respective discourses. This section is

therefore deliberately kept short and focuses on implications that came up

throughout and on overall implications that stem from taking a strategic public

value perspective on the role of organizations in society. Figure 2 gives an

overview of the implications of regarding public value management as a

strategic issue.

We do not include a section on limitations, as these are discussed in

detail in the respective papers pertaining to the relevant methodological

approach. We should note, however, that the papers in this dissertation take

different approaches (conceptual, quantitative-empirical, and qualitative-

empirical), complementing each other and balancing the respective

methodological weaknesses.

FIGURE 2:

Overview of implications

Bridge business & society-

strategy gap

Public value is a strategic issue

Public value perspective on

strategic issues

Public value to be handled as a

strategic topic

• PV regards societal issues

from a descriptive and

pragmatic angle

• PV anchors societal role in

core business

• Critique of stakeholder theory

• Industry competition

(Paper 2)

• Performance measurement

(Paper 3)

• Growth and ambidexterity

(Paper 4)

• Topic deserves top-

management attention

• „Diagonal“ topic not limited

to particular function or

product

• Does justice to complexity of

societal role

Introduction

59

Implications for Theory

One theme that consistently comes up in the various papers in this

dissertation is the relationship between public value and stakeholder theory

(Freeman, 1984). Stakeholders are all the individuals or groups that have an

interest (“a stake”) in the organization. Stakeholder value, then, is the sum of the

value that a firm creates for all its stakeholders. This view assumes that value

for a particular stakeholder is created when that person or group’s (self-

interested) preferences are satisfied.

The dissertation deals with stakeholder theory in different papers:

Paper 1 distinguishes between public value and other theories in the business

and society field, one of them being stakeholder theory. A crucial difference is

the public value concept’s holistic and specific value definition. The comparison

of organizational reputation and public value in Paper 2 carves out the role of

the evaluator as a core difference between the two concepts. We found that the

evaluator is in a citizen role when it comes to public value and in a stakeholder

position when making judgments about organizational reputation. The data

analysis for Paper 4 revealed that different (stakeholder) groups associate

similar public values with FC Bayern Munich. This observation points to

societal value creation not being dependent on a particular stakeholder position,

but cutting through such group affiliations.

Stakeholder theory has been very influential and has been the subject of

major debates in the business and society field (Schwartz & Carroll, 2008).

Walsh has criticized stakeholder theory for not being theoretically precise,

stating that “the stakeholder arena is filled with contest and controversy” (2005:

435). Winn (2001) points to the hard to handle complexity that is associated

with weighing the interests of different stakeholders.

From a public value perspective, there is another challenge to

stakeholder theory: positionality. Stakeholder theory assumes that value creation

is fully dependent on the (material) position of an individual or group vis-à-vis


60

the organization. In essence, this is what defines a stakeholder role. Sen (2009:

155-156) describes the problem with positional judgments when he asserts that

“[w]hat we can see is not independent of where we stand in relation to what we

are trying to see. And this in turn can influence our beliefs, understanding and

decisions.” As outlined in the description of Meynhardt’s public value approach

and the “Public Value is what the Public Values” section, public value theory

assumes that individuals are to some extent capable of evaluating what is good

for society, in other words what contributes to the common good. Such

evaluations entail an abstraction from one’s own parochial interests and

position.16 This is not to say that public value judgments are entirely positionally

independent. Being capable of thinking in terms of a public is not dependent on

a Rawlsian veil of ignorance, where all information on an individual’s position

in society is erased. In a similar vein, Sen warns that “the hope of proceeding

smoothly from positional views to an ultimate ‘view from nowhere’ cannot hope

to succeed fully” (2009: 169).

Public value judgments are individuals’ overall evaluation of an

organization’s contribution to the common good. Such evaluations are

influenced by individual experiences with the organization (e.g., as customer,

product user, or employee) as well as an overall evaluation of the organization’s

value for society (stemming for instance from word of mouth, media reports,

organizational image as well as personal intuition). It therefore seems

appropriate to assume that individuals are at once stakeholders (positional) and

citizens (non-positional) and adopt a systemic conception of value creation that

does justice to this.

16 This is also the rationale behind Moore’s distinction between customers/clients and citizens: “[I]t is important to distinguish the evaluation that citizens and their representatives

give to governmental activities from the evaluation that would be given by clients. [...] The

ultimate consumer of government operations is not the individuals who are served or obliged in individual encounters (the clients of the enterprise) but citizens and their representatives in

government who have more general ideas” (1995: 37-38 [emphasis in original]).

Introduction

61

Such a systemic and holistic conception of value creation resembles

what Selznick (1992) calls a functional theory of corporate social responsibility.

He states that “[r]ather than ask what groups have a claim, we ask what values

should be protected and enhanced. [...] Responsibility runs to the social

function, not to a constituency” (1992: 351).

Further theory-building conceptual research on public value and

stakeholder theory should analyze to what extent stakeholder evaluations and

public value evaluations meet the requirements of objectivity (Nagel, 1986) or

positional objectivity (Sen, 2009). Based on this, a more empirical endeavor on

the relationship between the two constructs could be launched and tackle

research questions such as: What is the influence of stakeholder group

affiliations on public value evaluations? Is there a way of aggregating

stakeholder value creation to obtain a useful proxy for public value creation? Do

public value and stakeholder value share similar antecedents?

Another potential avenue for further research concerns the formulation

of a public value-based theory of the firm. Micklethwait and Wooldridge (2003)

point out that two recurrent themes shaped companies in the past and will

continue doing so: First, the balance between organizational hierarchy costs and

market transaction costs determines whether companies make sense from an

economic perspective. Second, firms need an – implicit or explicit – license to

operate from society, which can take different forms. The public value research

program, of which this dissertation is one part, developed some ideas for

answering the second question. From a public value perspective one might

argue that the two questions are not that distinct and that it is somewhat limited

to explain the existence of firms by economic factors only.

Coase’s (1937) theory, which predicts that firms emerge when the costs

of organizing processes based on the division of labor are lower in an

organizational setting (hierarchy costs) than in a market setting where the

individual actors involved in the value creation process buy and sell their


62

intermediary products (transaction costs), certainly has a lot of explanatory

power. Nonetheless, a different perspective – towards a public value-based

theory of the firm – might open up avenues for understanding the existence and

shape of firms (and other organizations) with an emphasis on their social

function. This undoubtedly ambitious theoretical endeavor could complement

existing approaches to explaining the existence of firms.

These two areas – the relationship of public value with stakeholder

theory and the development of a public value-based theory of the firm – promise

a lot of potential for the continuation of the public value research program.

Implications for Practice

The papers show that public value management issues permeate

conventional management functions. The analogy with organizational reputation

(Paper 2) points to public value as a general management issue. The dissertation

shows that public value aspects apply to performance management (Paper 3),

communication management (Paper 4), growth management (Paper 4) as well as

service-oriented marketing (Paper 5).

The fact that public value questions cut through conventional functions

and permeate classical top management team roles – which tend to be defined

either hierarchically in terms of products or geographic divisions (vertical) or

functionally (horizontal) – calls for the creation of a topic-specific (diagonal)

role that deals with public value. Such topic-specific (Type 3) top management

roles have lately been observed for a number of issues, for instance “Chief

Digitalization Officer” or “Chief Strategy Officer” (Menz, 2014). Consequently,

we propose the creation of a “Chief Public Value Officer” role, especially in

organizations that have an exposed public role which they need to manage

actively. Examples of such organizations include football clubs (see Paper 4),

media companies, and basically all organizations which are in “the public eye”

due to their scale and scope.

Introduction

63

The creation of a dedicated managerial role on board level would

certainly give the topic a lot of clout and top management attention. Where such

an arrangement is not (yet) feasible or desired, public value issues should

nevertheless not be assigned to the corporate social responsibility or public

affairs department. Our results indicate that public value is a strategic issue that

must be handled by an organization’s top management or by the strategy

department.

We demonstrated that public value considerations are relevant in

several areas. Public value should therefore not be dealt with on a project basis

as a “nice to have add-on,” but should be incorporated in existing management

systems and tools. A public value scorecard analysis (Meynhardt, 2015) can for

instance be made a standard step in M&A due diligence processes (see Müller et

al. 2013), in the development of new marketing campaigns and products (see

Paper 5), or in the evaluation of strategic initiatives (see Paper 4). Public value

is, however, not always manageable on an individual firm level. Paper 2

indicates that public value commons need to be managed cooperatively on an

industry level. Thus, existing institutions, such as industry associations and

alliances, can play an important role and create value for their members and

society alike.

CONCLUSION

We can conclude that it is promising to see the social function of

management and organizations from a (public) value creation perspective. This

vantage point enables us to break out of a trade-off logic that juxtaposes

“business” and “social” logic. On the contrary, a public value perspective does

justice to the conception of organizations as social systems (“institutions”) that

are firmly embedded in their societal environment and need to be managed

accordingly. Shifting the strategic management focus to public value creation is

also more helpful, as it links organizations’ societal role to value creation in


64

their core business and sees managers – public and private alike – as value

creators for society, offering them a positive and meaningful function.

All this being said, public value research has come a long way. What

started as a somewhat obscure public management approach that initially

gathered dust on library shelves is evolving as an interdisciplinary research

program on society-oriented strategic management in both the public and the

private sector. In the end, we can assert that there is such a thing as society that

matters in strategic management and that organizations – whether public or

private – can be and should be part of the solution to society’s most pressing

challenges.

Introduction

65

REFERENCES

Alford, J., & O’Flynn, J. 2009. Making sense of public value: Concepts,

critiques and emergent meanings. International Journal of Public

Administration, 32(3-4): 171-191

Andersen, L. B., Jørgensen, T. B., Kjeldsen, A.B., Pedersen, L. H., &

Vrangbæk, K. 2012. Public values and public service motivation:

Conceptual and empirical relationships. American Review of Public

Administration, 43(3): 292-311.

Barney, J. B. 1991. Firm resources and sustained competitive advantage.

Journal of Management, 17(1): 99-120.

Barney, J. B., & Felin, T. 2013. What are microfoundations? Academy of

Management Perspectives, 27(2): 138-155.

Benington J., & Moore M. H. 2011. Public value in complex and changing

times. In J. Benington, & M. H. Moore (Eds.), Public Value: Theory and

Practice: 1-30. Basingstoke, UK: Palgrave Macmillan.

Behn, R. 2014. The PerformanceStat potential: A leadership strategy for

producing results. Washington, DC: Brookings Institution Press.

Beringer, L., & Bernard, S. 2013a. Stern des Südens – Fußballverein oder

weltweites Entertainment? Der Public Value des FC Bayern München.

Organisationsentwicklung. Zeitschrift für Unternehmensentwicklung und

Change Management, 4: 13-19.

Beringer, L., & Bernard, S. 2013b. Der Public Value des FC Bayern München.

Unpublished diploma thesis for the Executive Master of Business

Engineering at the University of St.Gallen.

Birkinshaw, J., & Gupta, K. 2013. Clarifying the distinctive contribution of

ambidexterity to the field of organization studies. Academy of Management

Perspectives, 27(4): 287-298.


66

Bozeman, B. 2004. All organizations are public: Comparing public and

private organizations. Washington, DC: Beard Books. Reprint of 1987

publication by Jossey-Bass Inc. under the title All organizations are public:

Bridging public and private organizational theories.

Bozeman, B. 2007. Public values and public interest: Counterbalancing

economic individualism. Washington, DC: Georgetown University Press.

British Broadcasting Corporation [BBC]. 2004. Building public value:

Renewing the BBC for a digital world. British Broadcasting Corporation:

London

Bryson, J. M., Crosby, B. C., & Bloomberg, L. 2014. Public value governance:

Moving beyond traditional public administration and the new public

management. Public Administration Review, 74(4): 445-456.

Bryson, J. M., Crosby, B. C., & Bloomberg, L. 2015a. Public value and public

administration. Washington, DC: Georgetown University Press.

Bryson, J. M., Crosby, B. C., & Bloomberg, L. 2015b. Creating public value in

practice: Advancing the common good in a multi-sector, shared-power,

no-one-wholly-in-charge world. Boca Raton, FL: CRC Press

Carroll, A. B. 1991. The pyramid of corporate social responsibility: Toward the

moral management of organizational stakeholders. Business Horizons, 34:

39-48.

Carroll, A. B. 1999. Corporate social responsibility: Evolution of a definitional

construct. Business & Society, 38(3): 268-295.

Coase, R. H. 1937. The nature of the firm. Economica, 4(16): 386-405.

Collins, R. 2007. Public value and the BBC: A report prepared for the Work

Foundation’s public value consortium. London: The Work Foundation.

Crabtree, J. 2004. The revolution that started in a library. New Statesman,

September 27.

Introduction

67

Crane, A., & Matten D. 2007. Business ethics. Oxford, UK: Oxford University

Press.

Crane, A., Palazzo, G.., Spence, L. J., & Matten, D. 2014. Contesting the value

of “creating shared value”. California Management Review, 56(2): 130-

153.

Dewey, J. 1927. The public and its problems. New York: Holt.

Drucker, P. F. 1992. The new society of organizations. Harvard Business

Review, 70(5): 95-105.

Ebeling, W., & Feistel, R. 1994. Chaos und Kosmos. Prinzipien der Evolution.

Heidelberg: Spektrum Akademischer Verlag.

The Economist, 2011. Oh, Mr. Porter. May 10th. Posted online at:

http://www.economist.com/node/18330445.

Epstein, S. 1989. Values from the perspective of cognitive-experiential self-

theory. In N. Eisenberg, J. Reykowski, & E. Staub (Eds.), Social and moral

values: Individual and societal perspectives: 3-22. Hillsdale, NJ: Lawrence

Erlbaum Associates.

Fombrun, C. J. 1996. Reputation: Realizing value from the corporate image.

Boston, Mass: Harvard Business School Press.

Fombrun, C., & Shanley, M. 1990. What’s in a name? Reputation building and

corporate strategy. Academy of Management Journal, 33(2): 233-258.

Freeman, R. E. 1984. Strategic management: A stakeholder approach.

Cambridge, UK: Cambridge University Press.

Freeman, R. E., Wicks, A. C., & Parmar, B. 2004. Stakeholder theory and “the

corporate objective revisited”. Organization Science, 15(3): 364-369


68

Frey, B. S., & Stutzer, A. 2002. Happiness and economics: How the economy

and institutions affect well-being. Princeton, NJ: Princeton University

Press.

Giddens, A. 1998. The third way: The renewal of social democracy.

Cambridge, UK: Polity Press.

Gomez, P., & Meynhardt, T. 2012. More foxes in the boardroom: Systems

thinking in action. In S. N. Grösser, & R. Zeier (Eds.), Systemic

Management for Intelligent Organizations: 83-98. Berlin: Springer-Verlag.

Granovetter, M. S. 1985. Economic action and social structure. The problem of

embeddedness. American Journal of Sociology, 91(3): 481-510.

Haken, H. 1984. Can synergetics be of use to management theory? Springer

Series in Synergetics, 26: 33-41.

Haken, H. 1993. Synergetics as a strategy to cope with complex systems.

Springer Series in Synergetics, 62: 5-11.

Holland, J. H. 2014. Complexity: A very short introduction. Oxford, UK:

Oxford University Press.

Hood, C. 1991. A public management for all seasons? Public Administration,

69(1): 3-19.

Karmasin, M., Süssenbacher, D., & Gonser. N. (Eds.) 2011. Public value:

Theorie und Praxis im internationalen Vergleich. Wiesbaden, Germany:

Springer Fachmedien.

Lange, D. L., Lee, P. M., & Dai, Y. 2011. Organizational reputation: A review.

Journal of Management, 37(1): 153-184.

Lusch, R. F., & Vargo, S. L. 2014. Service-dominant logic: Premises,

perspectives, possibilities. Cambridge, UK: Cambridge University Press.

Introduction

69

Mankiw, N. G., & Taylor, M. P. 2006. Economics. London: Thompson

Learning.

Menz, M. 2014. Die Unternehmensführung im 21. Jahrhundert. Inaugural

lecture at the University of St.Gallen, December 2, 2014.

Merz-Benz, P.-U. 2015. Einleitung. In P.-U. Merz-Benz (Ed.), Öffentliche

Meinung und soziologische Theorie: Mit Ferdinand Tönnies weiter

gedacht: 11-34. Wiesbaden: Springer Fachmedien.

Meynhardt, T. 2004. Wertwissen: Was Organisationen wirklich bewegt.

Münster: Waxmann.

Meynhardt, T. 2008: Public Value: Oder was heisst Wertschöpfung zum

Gemeinwohl?. der moderne staat, 1(2): 73-91.

Meynhardt, T. 2009. Public value inside: What is public value creation?.

International Journal of Public Administration, 32(3): 192-219.

Meynhardt, T. 2014. Ohne Gemeinwohl keine Freiheit. Neue Zürcher Zeitung,

235(238): 23.

Meynhardt, T. 2015. Public value: Turning a conceptual framework into a

scorecard. In J. M. Bryson, B. C. Crosby, & L. Bloomberg (Eds.), Public

value and public administration: 147-169. Washington, DC: Georgetown

University Press

Meynhardt, T., & Vaut, S. 2007. Die Renaissance der Gemeinwohlwerte.

Berliner Republik, 6: 64-75.

Meynhardt, T., & Metelmann, J. 2009. Pushing the envelope: Creating public

value in the labor market: An empirical study on the role of middle

managers. International Journal of Public Administration, 32(3-4): 274-

312.


70

Meynhardt, T., & Bartholomes, S. 2011. (De)Composing public value: In search

of basic dimensions and common ground. International Public

Management Journal, 14(3): 284-308.

Meynhardt, T., & von Müller, C. 2013. „Wir wollen Werte schaffen für die

Gesellschaft“ – Der Public Value im Spannungsfeld zwischen Aktienwert

und Gemeinwohl. Eine Fallstudie am Beispiel der Deutsche Börse AG.

Zeitschrift für öffentliche und gemeinwirtschaftliche Unternehmen, 36(2-

3): 119-149.

Meynhardt, T., & Gomez, P. 2015a. Was dient der Allgemeinheit? Und wer?

WirtschaftsWoche. Posted online on October 30, 2015 at:

http://www.wiwo.de/unternehmen/dienstleister/gemeinwohl-was-dient-der-

allgemeinheit-und-wer/12515726.html.

Meynhardt, T., & Gomez, P. 2015b. “Swiss dialogue” building blocks for

alternative four-dimensioned pyramids of corporate social responsibilities.

Unpublished manuscript.

Micklethwait, J., & Wooldridge, A. 2003. The company: A short history of a

revolutionary idea. New York: Modern Library.

Moore, M. H. 1994. Public value as the focus of strategy. Australian Journal of

Public Administration, 53(3): 296-303.

Moore, M. H. 1995. Creating public value: Strategic management in

government. Cambridge, MA: Harvard University Press.

Moore, M. H. 2013. Recognizing public value. Cambridge, MA: Harvard

University Press.

Moore, M. H. 2014a. Public value accounting: Establishing the philosophical

basis. Public Administration Review, 74(4): 465-477.

Introduction

71

Moore, M. H. 2014b. Accountability, legitimacy, and the court of public

opinion. In M. Bovens, R. E. Goodin, & T. Schillemans (Eds.), The Oxford

handbook of public accountability: 632-646. Oxford, UK: Oxford

University Press.

Moore, M. H., & Khagram, S. 2004. On creating public value: What business

might learn from government about strategic management. Corporate

social responsibility initiative working paper, 3. Cambridge, MA: John F.

Kennedy School of Government, Harvard University.

Moore, M. H., & Fung, A. 2012. Calling publics into existence: The political

arts of public management. In M. H. Moore, & J. D. Donahue (Eds.), Ports

in a storm: Public management in a turbulent world: 180-210.

Washington, DC: Brookings Institution Press.

Müller, J., Menz, M., & Meynhardt, T. 2013. Haniel (A): Corporate strategy

and corporate responsibility. Cranfield, UK: European Case Clearing

House.

Nag, R., Hambrick, D. C., & Chen, M.-J. 2007. What is strategic management,

really? Inductive derivation of a consensus definition of the field. Strategic


Nagel, T. 1986. The view from nowhere. Oxford, UK: Oxford University Press.

Nielsen, A. E. 2013. License to operate. In S. O. Idowu, N. Capaldi, L. Zu, & A.

Das Gupta (Eds.), Encyclopedia of Corporate Social Responsibility: 1585-

1591. Berlin: Springer.

Nonaka, I. 1994. A dynamic theory of organizational knowledge creation.

Organization Science, 5(1): 14-37.

O’Flynn, J. 2007 From new public management to public value: Paradigmatic

change and managerial implications. The Australian Journal of Public



72

Ochsenbauer, C., & Ziemke-Jerrentrup, K. 2013. Dem Wert einen Preis geben.

Der Beitrag öffentlicher Bäder zum Gemeinwohl und der „Public Value

Award“. Organisationsentwicklung. Zeitschrift für

Unternehmensentwicklung und Change Management, 4: 40-47.

Osborne, D., & Gaebler, T. 1992. Reinventing government: How the

entrepreneurial spirit is transforming the public sector. Reading, MA:

Addison-Wesley.

Papandreou, A. A. 1994. Externality and institutions. Oxford: Clarendon Press.

Pfarrer, M. D., Pollock, T. G., & Rindova, V. P. 2010. A tale of two assets: The

effects of firm reputation and celebrity on earning surprises and investors’

reactions. Academy of Management Journal, 53(5): 1131-1152.

Porter, M. E. 1980. Competitive strategy. New York: Free Press.

Porter, M. E., & Kramer, M. R. 2006. Strategy and society: The link between

competitive advantage and corporate social responsibility. Harvard

Business Review, 84(12): 78-92.

Porter, M. E., & Kramer, M. R. 2011. Creating shared value. Harvard Business

Review, 89(1-2): 62-77.

Rawls, J. 1971. A theory of justice. Cambridge, MA: Belknap Press.

Reagan, R. 1981. Government is not the solution to our problem; government

is the problem. Inaugural presidential address, January 20, 1981. Available

online at http://www.heritage.org/initiatives/first-principles/primary-

sources/reagans-first-inaugural-government-is-not-the-solution-to-our-

problem-government-is-the-problem.

Rhodes, R. A. W., & Wanna, J. 2007. The limits to public value, or rescuing

responsible government from the platonic guardians. The Australian

Journal of Public Administration, 66(4): 406-421.

Introduction

73

Schachter, H. L. 2010. Objective and subjective performance measures: A note

in terminology. Administration & Society, 42(5): 550-567.

Schedler, K., & Proeller, I. 2006. New public management. Bern: Haupt.

Schwartz, M. S., & Carroll, A. B. 2008. Integrating and unifying competing and

complementary frameworks: The search for a common core in the business

and society field. Business & Society, 47(2): 148-186.

Selznick, P. 1957. Leadership in administration: A sociological interpretation.

Berkeley, CA: University of California Press.

Selznick, P. 1992. The moral commonwealth: Social theory and the promise of

community. Berkeley, CA: University of California Press.

Sen, A. 2009. The idea of justice. Cambridge, MA: Belknap Press.

Smale, A. 2015. A car scandal shoves Berlin off high ground. The New York

Times. Posted online on September 25, 2015 at

http://www.nytimes.com/2015/09/24/world/a-car-scandal-shoves-berlin-off-

high-ground.html?hp&action=click&pgtype=

Homepage&module=first-column-region&region=top-news&WT.nav=top-

news&_r=1.

Strathoff, P. 2013. Creating shared value – Wie Porter der Kapitalismus neu

erfinden möchte. Organisationsentwicklung. Zeitschrift für

Unternehmensentwicklung und Change Management, 4: 90-91.

Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional

approaches. Academy of Management Review, 20(3): 571-610.

Sundaram, A. K., & Inkpen, A. C. 2004. The corporate objective revisited.

Organization Science, 15(3): 350-363.

Talbot, C. 2006. Paradoxes and prospects of ‘public value’ paper presented at

the 10th International Research Symposium on Public Management,

Glasgow, April 10-12, 2006.


74

Teece, D. J., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic

management. Strategic Management Journal, 18(7): 509-533.

Thatcher, M. 1987. Interview for Woman’s Own magazine [interviewer:

Douglas Keay]. Available online at

http://www.margaretthatcher.org/speeches/

displaydocument.asp?docid=106689

Tönnies, F. 2012. Studien zu Gemeinschaft und Gesellschaft. Compilation of

essays edited by Klaus Lichtblau. Wiesbaden: Springer.

Ulrich, H. 1968. Die Unternehmung als produktives soziales System. Bern:

Haupt.

Vargo, S. L., & Lusch, R. F. 2004. Evolving to a new dominant logic for

marketing. Journal of Marketing, 68: 1-17.

Waldo, D. 1968. Public administration in a time of revolutions. Public

Administration Review, 28(4): 362-368.

Walsh, J. P. 2005. Book review essay: Taking stock of stakeholder

management. Academy of Management Review, 30(2): 426-452.

Walsh, J. P., Weber, K., & Margolis, J. D. 2003. Social issues and management:

Our lost cause found. Journal of Management, 29(6): 859-881.

Weise, F.-J., & Deinzer, R. 2013. Den sozialen Auftrag fest im Blick: Die

gesellschaftliche Wertschöpfung der Bundesagentur für Arbeit.

Organisationsentwicklung. Zeitschrift für Unternehmensentwicklung und

Change Management, 4: 30-36.

Welch, J., Rimes, H., & Bozeman, B. 2015. Public value mapping. In J. M.

Bryson, B. C. Crosby, & L. Bloomberg (Eds.), Public Value and Public

Administration: 131-146. Washington, DC: Georgetown University Press.

Williams, I., & Shearer, H. 2011. Appraising public value: Past, present and

futures. Public Administration, 89(4): 1367-1384.

Introduction

75

Wilson, W. 1887. The study of administration. Political Science Quarterly, 2:

197-222.

Winn, M. I. 2001. Building stakeholder theory with a decision modeling

methodology. Business & Society, 40(2): 133-166.

Yankelovich, D. 1991. Coming to public judgment: Making democracy work

in a complex world. Syracuse, NY: Syracuse University Press.

Yin, R. 2009. Case study research: Design and methods. Los Angeles: Sage.

76

77

PAPER 1:

THE VBA MODEL AND PUBLIC VALUE: FILLING THE

VALUE GAP

Pepe Strathoff

February 2015

Abstract

The basic idea of the conceptual paper is to discuss the notion of value

creation in the business and society field and to present the public value concept

as a way of extending the understanding of business’s value creation for society.

First, the paper draws on the value balance accountability (VBA) model by

Schwartz and Carroll, in which value creation is identified as a central element

in the business and society field. Second, based on this, we critically evaluate

the VBA model’s value notion, which appears to be relatively vague and

narrow. Third, in order to tackle these gaps, we present Meynhardt’s public

value approach, which provides an extended notion of value creation. We

further propose a combined public value-balance-accountability-framework.

Public value fills the framework’s value dimension with actual content and

provides a microfoundation. It helps to overcome the separation fallacy. The

combined framework contributes to both theory and practice in the business and

society field.

Publication: Business and Professional Ethics Journal, 33(4): 297-319.


78

INTRODUCTION

The role of business in society has recently been one of the major

issues in public and academic debates. Movements such as Occupy Wall Street

and public calls for tighter banking regulation are just two examples of instances

in which business’s role has been called into question. At the same time, The

Economist sees a megatrend in the redefinition of business’s role “[f]rom profit

to purpose” (The Economist, 26.11.2012), while the renowned strategists

Michael Porter and Mark Kramer state that firms should assume leadership for

bridging the divide between business and society (Porter and Kramer 2011).

Consequently, the relationship between business and society and the value that

business creates for society is an important issue for managers and scholars, as

well as for society as a whole.

This paper specifically addresses the questions of how scholars can

conceptualize the value that business creates for society. In their review of the

most prevalent approaches in the business and society field, Schwartz and

Carroll (2008) identified value creation for society as a core category in

different approaches, such as corporate social responsibility (CSR), stakeholder

management, and corporate citizenship.

In this paper, we argue that, by employing the public value approach,

which Moore (1995) coined originally and which Meynhardt (2009) developed

further, it is possible to innovatively conceptualize business’s value for society.

Public value emerged in the public sector and describes how, by shaping

individuals’ experience of the social collective along different dimensions, an

organization contributes to society. Public value theory complements existing

approaches in the business and society field. The approach provides a

microfoundation for its claims at the individual level (cf. Aguinis and Glavas

2012; Morgeson et al. 2013) and helps overcome the separation fallacy (cf.

Freeman 1994; Harris and Freeman 2008; Parmar et al. 2010). Consequently,

Paper 1: The VBA Model and Public Value

79

this paper’s contribution consists in offering an extended notion of value

creation for the business and society field in the form of public value theory. In

doing so, we build on Schwartz and Carroll’s (2008) study, in which they

systematically review the business and society literature, and identify value

creation as a core element that appears consistently in the literature’s different

streams. We point out that, by including public value as the outcome dimension,

it would be possible to develop their value balance accountability (VBA) model

further.

In order to gain an overview of the existing literature in the business

and society field, we draw on the VBA framework—an especially coherent

approach—that Schwartz and Carroll (2008) proposed. Reviewing the

approaches in the business and society field that Schwartz and Carroll (2008)

regard as dominant, we first find that most authors focus on business practices’

negative consequences and do not conceptualize business’s contribution to

society holistically. Nevertheless, regarding business as an essential and

embedded part of society in a Druckerian (1942/2002; 1973) sense, requires a

deeper and more holistic understanding of how business creates (and destroys)

value for society. Second, most approaches run into problems when it comes to

substantiating their claims regarding the responsibilities that businesses have or

do not have. In respect of filling these gaps, a more precise definition of the

value dimension in the VBA framework is an interesting point of departure.

The remainder of this text is structured as follows: First, we provide an

overview of business and society scholarship, which we base on Schwartz and

Carroll’s (2008) article. Based on this overview, second, we describe the VBA

model and critically discuss the value definition that Schwartz and Carroll

(2008) provide. Third, we position public value as a complement to business

and society scholarship, explain the concept’s roots and theoretical assumptions,

and discuss how it can help us better understand and conceptualize the value

that business creates for society. Further, we point out the effect that including

public value in the VBA model would have on the balance and accountability


80

dimensions. In the end, we discuss the limitations and criticism of the proposed

public value-balance-accountability model, discuss its contribution to academic

thinking and managerial practice, and derive a conclusion.

Figure 1 provides an overview of the VBA model and shows where we

contribute by introducing public value. The five vertical columns represent the

five streams that Schwartz and Carroll (2008) identify as dominant in the

business and society field. The darker horizontal bars represent the VBA

model’s three dimensions: value, balance, and accountability. This article’s core

contribution is, however, our proposal of the public value approach as a

complement to the VBA model.

FIGURE 1

Public value in the VBA model


81

BUSINESS AND SOCIETY: SO CLOSE AND YET SO FAR

There are many different approaches to defining business’s role and

responsibilities in society. Carroll describes the business and society literature as

“an eclectic field with loose boundaries, multiple memberships and differing

training/ perspectives” (1994, 14). Windsor points to the need to find some form

of overarching approach when he makes clear that different approaches in the

business and society field do not share a common paradigm (2001). Freeman

(2000) states that, in the field, there is a deep divide and disconnect between

normative work, based on applied philosophy, and more descriptive, often

empirical, approaches.

Nevertheless, different attempts have been made to systemize the field.

For example, Garriga and Melé (2004) divide different theories into four

groups: instrumental theories, political theories, integrative theories, and ethical

theories. They base their classification on the assumption that most approaches

focus on certain aspects of social reality, such as economics or politics. Matten

and Moon (2008) distinguish between “implicit” and “explicit” CSR. Their

approach is aimed at explaining empirical differences in the implementation of

CSR practices in different cultural settings. Aguinis and Glavas (2012), who

conduct an extensive literature review and classify existing research according

to its level of analysis, suggest yet another approach. They distinguish between

contributions on an institutional, organizational, and individual level. In

addition, they find that there is a lack of microfoundations at the level of

individuals. Several other scholars have also systematically reviewed the

literature in the field (see Hansen 2010, 9 for an overview).

In this paper, we follow the approach of Schwartz and Carroll (2008),

who include a broad range of perspectives and provide a detailed account of

how they derived their VBA framework from the classification of approaches.

They claim that the different approaches can be collapsed into five major

streams of thought, namely corporate social responsibility, business ethics,


82

stakeholder management, sustainability, and corporate citizenship. In this

framework, CSR is just one stream in the business and society literature. It is

important to note, however, that some authors (e.g. Porter and Kramer 2006) use

the term to describe the entire business and society field. Based on Schwartz and

Carroll (2008), our following selective literature review provides a brief

description of the different streams. The referenced contributions epitomize the

respective streams’ foundations, authors who have introduced a differentiation

in different sub-streams, as well as important controversies, all of which

delineate the core aspects of each stream. Schwartz and Carroll (2008) adopt a

similar approach, but go into much more detail (cf. 156–165 of their article).

CSR is the most prominent approach and has also received widespread

attention from practitioners (Lee 2008). The CSR debate dates back to Bowen’s

seminal book in which he asks: “What responsibility to society will

businessmen reasonably be expected to assume?” (1953, xi). In his Pyramid of

Corporate Social Responsibility article (1991), Archie Carroll distinguishes

between corporate responsibilities on the philanthropic, ethical, legal, and

economic levels, thus providing an answer to Bowen’s question and making a

major contribution to the field. All CSR theories have their conceptualizing of

corporations’ role in society in terms of responsibility in common. Wheeler et

al. (2003) argue that most CSR approaches focus on business activity’s negative

externalities. This focus on negative social impacts is also where most criticism

of CSR is targeted at (see e.g. Porter and Kramer 2006; 2011; Davis 2005).

Business ethics is another stream in the business and society field that

is so close to CSR that certain authors have proposed to subordinate one concept

to the other (De George 1987; Joyner and Payne 2002). However, here, we

follow Schwartz and Carroll (2008), who regard CSR as a distinct stream.

Business ethics is a normative approach that uses concepts from moral

philosophy and applies them to a business context (Freeman 2000).

Accordingly, Goodpaster defines business ethics as “the study of business action


83

– individual or corporate – with special attention to its moral adequacy” (1997,

51). According to Schwartz and Carroll (2008), utilitarian and deontological

arguments are dominant in business ethics thinking.

Stakeholder management is the third relevant approach in the business

and society field. This stream of thought goes back to the book Strategic

Management:A Stakeholder Approach by Edward Freeman (1984). Stakeholder

theory argues that a firm’s management cannot focus solely on its shareholders’

interests but needs to take into account the consequences of its actions in respect

of all groups with a stake in the firm (Freeman 1984). In his review of

stakeholder theory, Walsh (2005) points out that the stakeholder arena is filled

with contest and controversy, and does not provide an alternative to the

neoclassical theory of the firm, but complements it by shedding light on its blind

spots. Schwartz and Carroll (2008) distinguish between “broad” versions of

stakeholder theory, in which everyone in some form of relationship with a firm

is considered a stakeholder, and “narrow” versions, in which only those groups

who are necessary for a firm’s survival are considered stakeholders. This aspect

also draws criticism: Stakeholder theory is basically a good idea, but it is hard to

draw the line between who should be a stakeholder and who should not, and

how the different stakeholders’ potentially diverging claims should be

prioritized.

The fourth stream, sustainability, focuses on the long-term

consequences of business activities, often emphasizing ecological factors. The

1972 book The Limits to Growth by Meadows et al., written under the auspices

of the Club of Rome, was a groundbreaking work, leading to the issue of how an

exponentially growing world population and economy interact with the world’s

finite resources being put on the agenda. The World Commission on

Environment and Development’s book Our Common Future, known as

Brundtland Report, subsequently introduced this issue to the corporate level.

Elkington, who has made a major and widely received contribution with his

triple bottom line (people, planet, profit), claims that sustainability “is the


84

emerging 21st century business paradigm” (1999, 20). Other authors focus on

business opportunities that arise when business model innovation is directed

towards sustainability (Schaltegger et al. 2012). Schwartz and Carroll argue that

sustainability underemphasizes ethical aspects and does not address legal issues

(2008).

Fifth and finally, the corporate citizenship concept deserves our

attention. Corporate citizenship draws an analogy between an individual citizen

with rights and obligations and a firm’s status in society. Matten et al. (2005)

distinguish between three definitions of the concept: 1) In a limited view,

corporate citizenship mainly describes a firm’s philanthropic and community

engagement. 2) In an equivalent view, corporate citizenship is more or less a

synonym for CSR. 3) In an extended view, corporate citizenship includes

political connotations, such as a firm’s involvement in the making and

implementing of laws. Carroll (1998) subscribes to the second view, seeing

corporate citizenship as a new framing for CSR and also attributing his CSR

pyramid’s four dimensions to the construct. The above enumeration points to

the major challenge to corporate citizenship approaches: The concept is

relatively vague and not sufficiently distinguished from CSR (Schwartz and

Carroll 2008).

SCHWARTZ AND CARROL’S VBA MODEL: THREE

LETTERS SAY IT ALL

The brief description of the different streams has shown that there is

considerable overlap, which causes confusion and differentiation problems.

Nonetheless, the streams certainly have different foci, areas in which they

position themselves, and are particularly prevalent, such as sustainability when

it comes to business in its natural environment. Schwartz and Carroll (2008)

argue that by carving out the essential features of each stream, one can discover


85

three core concepts, or dimensions, that appear consistently and cut across all

frameworks. These concepts are: value, balance, and accountability. Carroll and

Shabana (2010, 86) maintain that these three concepts represent “key,

underlying themes.” In the following, we take a brief look at all three concepts

or dimensions. Owing to this paper’s focus on value creation for society, we will

examine the value dimension in more detail than the others.

According to Schwartz and Carroll, the “generation of value” is the

“fundamental element underlying the entire business and society field” (2008,

168). They make a strong argument for the creation of value being a central

element in each of the five above-mentioned frameworks, and validate this with

quotes from authors of all five streams of thought (cf. 168–169). However,

given the importance they attribute to the concept, their definition of value

remains both vague and narrow: “Value is primarily created when business

meets society’s needs by producing goods and services in an efficient manner

while avoiding unnecessary negative externalities” (ibid., 168). The definition is

vague as neither “society’s needs” nor “unnecessary negative externalities” are

further specified. It also remains unclear how to measure value and what they

actually understand by “value.” This vagueness stems from the lack of a value

creation microfoundation in Schwartz and Carroll’s framework.

Simultaneously, the definition is narrow, as it is very focused on

business activity’s instrumental and material aspects, i.e. the efficient

production of goods and services, but ignores other important value dimensions,

such as a firm’s impact on the quality of public life or on social cohesion. This

focus on instrumental aspects is also evident in the authors’ claim that Wal-Mart

is “arguably generating net value for society through employment and more

affordable consumer goods” (ibid., 176). The definition is also caught in what

Freeman would call the separation fallacy, as doing business efficiently

(business side) is opposed to the avoidance of negative externalities (moral

side). However, in itself, the conduct of business is never value-free and

influences societal values beyond questions of material needs fulfillment and


86

efficiency. Freeman, Wicks, and Parmar make clear that theories which

distinguish between an economic dimension on the one hand and values on the

other hand arrive at an overly narrow perspective “that cannot possibly do

justice to the panoply of human activity that is value creation” (2004, 364). One

might even argue that the separation fallacy prevents some of the streams in the

business and society field from focusing on value creation as their central idea.

Schwartz and Carroll also clarify that the creation of value for society

is their framework’s outcome dimension. In a later section, we will argue that

“filling” Schwartz and Carroll’s value dimension with the public value concept

can provide this outcome component with a microfoundation, thereby making

the VBA model an even more convincing meta concept for the business and

society field. Wheeler et al. (2003) state that the creation of value is the most

important motivator of all business activity and emphasize the “importance of

acknowledging multiple perspectives in defining ‘value.’” They explain that the

“process of defining and creating value is fundamentally pluralistic and

iterative” (15). In a similar vein, focusing on Carroll’s (1991) pyramid

framework, Meynhardt and Gomez (2014) show that CSR lacks an explicit

framework to link business’s postulated responsibilities to values held in

society. In other words, a psychological microfoundation (Barney and Felin

2013) is needed. Aguinis and Glavas (2012) have called for such

microfoundation of CSR research at the level of individuals. In the section in

which we describe Meynhardt’s (2009) value notion, we also discuss how

public value contributes to a microfoundation that links the individual to the

collective level, without assuming that simply adding up individual-level factors

explains collective phenomena (cf. Barney and Felin 2013).

The second dimension of the VBA framework is balance. In this

context, balance refers to appropriately taking all the stakeholders’ interests and

needs into account and finding a balance between different moral standards.

Schwartz and Carroll point out that “balance is the process component of the

VBA framework” (2008, 170; emphasis in original).


87

Third, accountability forms the framework’s principles dimension.

Accountability means that actors accept responsibility for their actions and the

public can hold them accountable, because sufficient information is available.

Therefore, transparency is an important condition for accountability (Schwartz

and Carroll 2008).

The business and society literature refers to the VBA framework as a

systematic literature review (Hahn et al. 2010; Hansen 2010), a clarification of

existing constructs concerning CSR (Castelló and Lozano 2010), a

demonstration of the diversity of the streams in the field (Néron 2010), and an

attempt to reframe the field (Antal and Sobczak 2013). However, there is not

much constructive debate on the model’s strengths and weaknesses and how it

could be developed further. This paper contributes to closing this gap.

PUBLIC VALUE: FILLING THE VALUE GAP

This paper’s key idea is the inclusion of public value in the VBA

framework in order to develop the model further and address some of the

concerns about the employed value definition. In the following, we introduce

Meynhardt’s public value concept. We start with the concept’s roots in public

administration, carry on to its positioning in value philosophy, and describe

how, on the basis of basic needs theory, it is possible to derive public value

dimensions. Further, we use an example – the Deutsche Börse AG (the German

stock exchange) – to describe how public value can holistically capture

organizations’ value creation for society.


88

PUBLIC SECTOR ORIGINS AND TRANSFER TO

PRIVATE FIRMS

In 1995, Mark Moore’s book Creating Public Value—Strategic

Management in Government coined the term “public value” as a frame for

thinking about organizations’ contribution to society (cf. Bryson et al. 2014).

Moore was the first to understand public value as an outcome variable of

managerial action in the public sector, or as a measure of organizational

performance. Public value enables public managers to understand their role and

manage their activities in terms of creating value for society (Moore 1995). The

public value concept gained prominence in the early 2000s, when it was “the

talk of Westminster,” because think tanks close to Britain’s Blair government

adopted it (Crabtree 2004).

How does this debate on value creation by public agencies contribute to

the business and society field? As outlined above, Schwartz and Carroll’s value

definition can be criticized, because it is simultaneously too vague and too

narrow, caught in the separation fallacy and in need of a microfoundation. The

public value concept seems to be a promising candidate to tackle these

weaknesses, which requires applying a public administration concept to private

firms. Meynhardt supports this transfer and states that:

In my view a more general theory of PV [public value]

should not be restricted to public administration. . . . Since

any organizational action is always subjected to

heterogeneous “external” evaluation and changing

expectations in pluralist societies, there is always a

feedback from and to society. With or without formal

obligations one cannot but influence public values.

(Meynhardt 2009, 193)

This statement expresses a Druckerian sense of organizations being

embedded in society, and therefore impacting on and receiving feedback from


89

society. According to Moore and Khagram (2004), the power of private firms

has increased relative to that of government due to their accumulation of

financial and organizational resources. Therefore, political and social actors are

increasingly directing demands about the production of social goods towards

private corporations which nowadays have to actively develop legitimacy and a

license to operate from the public. Hence, in this case, it might make sense to

transfer theory from public administration research to the role of private sector

firms in society.

In their attempt to reconstruct Archie Carroll’s famous pyramid,

Meynhardt and Gomez (2014) suggest a distinct approach to link the public

value approach to the business and society debate. They draw on Garriga and

Melé’s (2008) classification of CSR theories, who distinguish between

stakeholder theory, shareholder value theory, corporate citizenship theory, and

corporate social responsibility, and link them to Meynhardt’s four public value

dimensions (2009; see description below). Meynhardt and Gomez (2014) argue

that “no CSR theory captures the full roundedness of human nature,” that there

is no “further room for a fifth CSR theory, except one which tries to integrate

the others,” and that the approaches should not be regarded as alternatives, but

rather as equally important complements. Their reasoning does not contradict

this paper’s argument, but goes hand in hand with it, as Meynhardt and Gomez

refer to specific streams of thought, while this paper deals with the overarching

dimensions as suggested by Carroll and Schwartz (2008). However, this paper

argues that it is not reconstruction work that is needed but rather the inclusion of

an extended value definition – public value – on a meta-level.

VALUE IS LOCATED IN RELATIONSHIPS

Public value can complement the VBA framework, because it is both

specific and holistic, and anchors the notion of “value” as well as the notion of

“public” in cognitive processes. Most importantly, the concept offers a clear


90

definition of value (for more details, cf. Meynhardt 2009; Forthcoming).

Meynhardt (2009) returns to value philosophy and discusses the opposing

strands of value objectivists – who view value as a characteristic of an object –

and value subjectivists – for whom value is bound to subjective evaluations.

Drawing on Heyde, he takes a middle ground and places value between an

evaluating subject and the evaluated object—“value is in the relationship”

(Heyde 1926, 77, in Meynhardt 2009, 198, translation by Meynhardt). Value,

then, cannot be ascribed as a property of a certain object, but is always the result

of some evaluation process involving an evaluator. Despite this value relativist

notion, a certain objectivity can arise when a number of individuals share

comparable evaluations. In this understanding, any value (public or private) is

located in relationships and value creation always requires an evaluating

subject’s positive evaluation.

Public value is therefore value that comes into being when the object of

evaluation is the public as an individually formed mental representation of

community and society (Meynhardt 2009). According to Meynhardt, “[t]he

‘public’ – psychologically speaking – is an individually formed abstraction

generated on the basis of experiences… And any other sociological definition is

only relevant for action if it is reflected on the psychological level” (2009, 204).

Public value is created (or destroyed) when an organization’s actions positively

(or negatively) affect the relationship between an individual and the public. A

positive or negative impact on that relationship has to be reflected in peoples’

perception, otherwise no public value creation takes place (Meynhardt 2009,

Forthcoming).

Moore underlines that “managers must satisfy some kinds of desires

and operate in accord with some kinds of perceptions” (1995, 52). This

statement points to values being the result of psychological and emotionally-

laden evaluation processes. Value does not exist per se, but has to be reflected in

perception and desirability on an individual level.


91

According to Schwartz and Carroll (2008), ultimately, most claims

about business’s role in society rely on some form of normative reasoning about

what is valuable. The underlying ideas – such as the preservation of the planet

or solidarity – are derived from huge and abstract thought constructs and

describe outcomes on a macro level. Anchoring value creation in evaluation

processes, as described above, contributes to the field’s microfoundation.

Meynhardt (Forthcoming) also describes how these values can achieve some

degree of objectivity when different individuals share them, leading to the

emergence of values as collective properties that link the individual to the

collective level. Thereby, he contributes to a microfoundation that explicitly

takes emergent collective phenomena into account and goes beyond a simple

additive aggregation (Barney and Felin 2013).

BASIC NEEDS AS YARDSTICKS OF VALUATION

So far we have outlined the basing of public value in evaluation

relationships and the consequential focus on perception and desirability.

However, we still need to explain on which basis individual evaluations are

made. Basic needs theory provides insights into what individuals ultimately find

desirable and on what they base their evaluations. The idea behind this is

simple: Every time a basic need is fulfilled, people have positive and pleasant

feelings and, hence, value is created (Meynhardt 2009). According to

Meynhardt and Gomez: “Our basic premise is that any contribution of an

organization with consequences for its societal environment is regarded as

impacting the fulfillment of basic human needs” (2014). Linking CSR to basic

human needs is not an entirely new idea. Tuzzolino and Armandi (1981) have

attempted to derive CSR dimensions from Maslow’s hierarchy of needs model.

They propose that organizations – just like human beings – have certain needs.

This leads them to the statement that human needs theory is “a useful

framework for conceptualizing the organization in its emerging socially


92

responsible role” (1981, 22). Melé states that a “good normative theory needs a

good philosophical foundation, which has to include a correct view of human

nature, business, and society, and the relationship between business and society”

(2008, 76). Linking the creation of value for society to the fulfillment of basic

needs also contributes to a corporate responsibility microfoundation at the

individual level, for which there has recently been a call (Aguinis and Glavas

2012). The anchoring of social responsibility in basic human needs by including

Meynhardt’s (2009) value notion in the VBA model (Schwartz and Carroll

2008) is this paper’s core idea.

The broad field of human motivations and basic needs has been

conceptualized and structured in many different ways. Popular examples include

Maslow’s (1943) hierarchy of needs and Herzberg’s (1968) two-factor theory.

The psychologist Seymour Epstein provides a meta-analysis of existing theories

on human basic needs and finds that no hierarchy of needs can be derived

empirically. The weight given to any motive can vary between individuals and

over time (1989 in Meynhardt 2009). According to Epstein, there are four

dimensions of basic needs which Meynhardt (2009) relates to basic public value

dimensions: first, a basic need for a positive self-evaluation translates into a

moral-ethical public value dimension. Here, the focus is on the individual.

Second, the basic need to avoid pain and maximize pleasure relates to a

hedonistic-aesthetical public value dimension with an emphasis on positive

experiences. Third, the need for control over one’s environment and the

coherence of the conceptual system leads to a motivation for predicting cause

and effect relationships and can be described as a utilitarian-instrumental public

value dimension that focusses on utility. Finally, a basic need for positive

relationships with other individuals is the basis of a political-social public value

dimension. This dimension’s focus is on the group. Figure 2 provides an

overview of the four public value dimensions.


93

PUBLIC VALUE: TOWARDS A HOLISTIC

UNDERSTANDING OF VALUE CREATION

As described above, the value dimension in the VBA framework is not

only vague, but also relatively narrow, because it reduces value creation for

society to instrumental aspects. From a public value angle, we would argue that

these fall into the instrumental-utilitarian dimension of public value. However,

based on public value research, an argument can be made for there being more

to the role of business in society than the efficient production of goods and

services with a minimum of negative externalities.

FIGURE 2

The four dimensions of public value

Note: adapted from Meynhardt 2009, p. 209

By opening up value creation to different dimensions, the public value

concept offers a more holistic concept of value creation. The example of the

Deutsche Börse AG (the German stock exchange) helps illustrate this point: A

qualitative empirical study (Meynhardt and von Müller 2013; Meynhardt

Forthcoming) assessed this organization’s public value. Interestingly, this


94

organization’s value to the public is focused on, but not limited to, generating

returns for its shareholders and providing a functioning financial market

infrastructure. However, its public value goes beyond that, because the

organization also serves as a role model and identity anchor. The Deutsche

Börse AG is seen as a symbol of Frankfurt as a financial center in its own right.

Moreover, it plays an important role in the protection of investors’ rights and is

considered a “fair player” in the financial market. Owing to its prominence and

its special configuration as a for-profit organization (whose shares are listed)

with a public law mandate to provide part of Germany’s financial infrastructure,

the Deutsche Börse AG is certainly a special case regarding public value

creation. Yet, it illustrates that we do not get the full picture if we understand

value creation as a purely instrumental endeavor only concerned about

efficiency and the avoidance of negative externalities. As described above, this

is where we go beyond Schwartz and Carroll’s (2008) value notion.

The public value notion explicitly acknowledges that the role and

actions of any organization – whether a public administration, a non-

governmental organization, or a private sector firm – impact values along

different dimensions and, as described above, are subject to evaluation based on

basic needs. In doing so, public value integrates economic and moral, as well as

political and hedonic considerations. The Deutsche Börse AG example

illustrates how an organization creates public value on different dimensions and

thereby suggests that this perspective is appropriate. Whereas Schwartz and

Carroll’s (2008) value definition seems to be caught in the separation thesis,

public value acknowledges that there can be no differentiation between value-

free business logic on the one hand and normative concerns on the other hand

(cf. Harris and Freeman 2008). Therefore, public value with its focus on value

creation along different dimensions in an organization’s core business helps

overcome the separation fallacy that plagues the business and society field.

Public value advocates a holistic view, taking value creation in all four

dimensions into account and making trade-offs visible. This anchoring of value


95

creation in empirically derived psychological human needs eliminates the

vagueness of Schwartz and Carroll’s value concept and infuses the value

dimension with concrete content.

THE “B” AND THE “A”: HOW PUBLIC VALUE ADDS TO

THESE DIMENSIONS

As described in the last section, the public value concept mainly adds

to the VBA framework in the value dimension. However, there are also some

insights for the “balance” (“B”), as well as the “accountability” (“A”)

dimension.

Balance refers to appropriately prioritizing conflicting moral standards

and stakeholder claims. In his review of major books on stakeholder theory,

Walsh (2005) finds that even the very basic question of who should be

considered a stakeholder and who should not is not easy to answer. This issue

becomes even more complex when the claims of different – in themselves

potentially heterogeneous – stakeholder groups need to be weighed against each

other (Winn 2001). The public value approach can help solve this problem by

taking a step back and replacing a scattered landscape of conflicting stakeholder

interests with the idea of a public that exists in people’s minds as an

“operational fiction” (Meynhardt 2009, 205). At the same time, the public value

approach can contribute to balancing conflicting perspectives by looking at

different value dimensions simultaneously without assuming an a priori

hierarchy. This enables value conflicts’ resolution on a case by case basis, and

the four dimensions open up a public value landscape (see Meynhardt 2009),

which can help us to empirically and theoretically identify blind spots. Public

value also challenges the notion that, assuming a (partial) incommensurability of

values, it is at all possible to achieve a stable balance or equilibrium of different

values (Meynhardt 2009; Forthcoming).


96

Public value can also add to the VBA framework’s accountability

dimension. The anchoring of public value creation in psychological basic human

needs allows organizations and researchers to create questionnaires in order to

measure public value creation (for such an empirical study on the public value

of Germany’s federal labor agency, see Meynhardt and Bartholomes 2011). This

can help hold executives accountable, especially because it enables us to

compare different organizations’ public value creation. The initial empirical

studies have shown that public value creation varies greatly between

organizations (for a public value ranking, see www.gemeinwohl.ch – in German

only). The use of public value scorecards is another approach to measuring

public value creation (Moore 2013, Meynhardt Forthcoming). Mark Moore

advocates the use of such a tool in order to hold (public) managers accountable

and to enable a public dialogue that goes beyond formal levels of accountability

and focuses on “substantive concerns about the values at stake” (2013, 169).

Schwartz and Carroll’s (2008) accountability notion is focused on information

disclosure and being able to hold actors accountable for wrongdoings.

According to Moore (1995; 2013), public value with its focus on calling public

deliberations into existence adds a notion to accountability that goes beyond the

formal ability to attribute cause and effect-type responsibility for wrongdoings.

Consequently, public value contributes to a broader understanding of

accountability in the business and society field, which we address in the

discussion below.

BRAVE NEW WORLD OF PUBLIC VALUE?: DISCUSSION

Public value seems to fill certain gaps in the business and society

debate; most notably it provides a workable and holistic value definition that is

microfounded and helps overcome the separation fallacy. This work’s key

contribution is including an innovative way of looking at how firms create value

for society into an established framework (VBA model). Nevertheless, some


97

qualifications are needed regarding the combined public value-balance-

accountability model (see figure 1). These mostly stem from criticism of the

initial public value approach, but need to be taken into account when discussing

a combination of the VBA model and public value:

First, linking public value to the VBA model by no means replaces

existing approaches in the field. As Schwartz and Carroll (2008) show, the five

frameworks all have their merits regarding emphasizing certain aspects of

business’s role in society. By providing a value definition that is holistic and

very open, public value adds something substantial on a meta level. This

definition does not allow us to rule out existing approaches, nor does it provide

decision-makers with clear rules on what (not) to do. It does, however, show us

that different approaches can exist side-by-side, making trade-offs visible.

Additionally, one could argue that the combined model loses its validity, as the

assumptions of the public value approach are not in line with those of the single

approaches. However, the public value approach explicitly allows different

approaches to be included and can cope with them all. Therefore, it can

complement a meta framework even if it does not share all assumptions with the

included approaches.

Second, we should nevertheless bear in mind that the proposed public

value approach is based on very specific assumptions. One central claim is that

values can be derived from favorable individual perception that is driven by the

fulfillment of basic needs (see Meynhardt 2009). In this view, “the public” is an

abstract concept that individuals hold, an operational fiction. Put differently, the

public “is what individuals perceive as the public” (Meynhardt 2009, 205;

emphasis in original). One could refute this position as psychologism and

comment that there is more to the public and to the notion of a common good

than what individuals perceive it to be. One could even argue that individuals

are not capable of thinking in terms of a public that adds quality to their life

unless there is a Rawlsian (1971) veil of ignorance that enables them to abstract

from their position in society. However, this criticism of public value implicitly


98

assumes that there is some form of common good that exists apart from

individual perception. The question then arises to whom this is valuable if

individuals do not appreciate it. Discussing this criticism underscores the point

that public value is not value for the public for its own sake, but ideally serves

as a resource for individuals to live a good life in a functioning society (Drucker

1942/2002).

This paper has only touched on what the inclusion of public value

might mean for the balance and accountability dimensions. Introducing a new

outcome dimension to the framework certainly also influences the process

(balance) and principles (accountability) dimensions. In terms of conceptual

work, an interesting discussion would be the delineation of the notion of

accountability and responsibility, or the difference between a narrow and a

broad understanding of accountability. As described above, Schwartz and

Carroll’s (2008) accountability notion is focused on information disclosure and

transparency for an audience with the power to sanction corporate actions.

Providing a certain level of disclosure is seen as part of acting responsibly.

However, one might also argue that accountability is actually the broader term

that goes beyond assignments of guilt, but includes a notion of principle and

mental attitude. Such an approach might be more suitable if the model’s

outcome dimension – value – is understood in terms of public value. An

accountability notion focused on holding wrongdoers accountable (i.e. external

sanctioning power) is no longer deemed appropriate. The relativist nature of

public value and the complex dynamics at play when public value is created (cf.

Meynhardt Forthcoming, Meynhardt and von Müller 2014, Haken 1977, Haken

and Mikhailov 1993) make clear attributions of right or wrong, as well as cause

and effect, far more difficult. Therefore, public value requires a notion of

accountability that is broader and entails an attitude and commitment that foster

value creation for society, as well as a heightened value awareness (Gomez and

Meynhardt 2012). Interestingly, this brings an old debate in ethics to the fore,

namely Max Weber’s (1919) distinction between an ethic of responsibility


99

(Verantwortungsethik) and an ethic of conviction (Gesinnungsethik). Further

conceptual work should dig deeper here and enquire what the consequences for

moral philosophy are if we adopt an understanding of value creation such as the

one this paper proposes.

CONCLUSION

We started this paper with the assertion that the academic business and

society debate abounds with different and partly conflicting approaches. At the

same time, businesses feel an increasing need to position themselves in society

and to define the values they contribute to society. As the famous management

thinker Peter Drucker has put it: “free enterprise cannot be justified as being

good for business. It can be justified only as being good for society” (Drucker

1973, 41).

Schwartz and Carroll’s (2008) VBA model was presented as a very

comprehensive and coherent attempt to systemize the business and society field.

However, some of the model’s weaknesses, especially concerning its value

concept, have been carved out. Subsequently, it was argued that the model,

representative of the entire business and society field, could profit from refining

its value concept. The public value concept, which Moore (1995) proposed and

Meynhardt (2009) developed further, was presented as a candidate to fill this

void. Public value anchors value contributions to society in basic human needs

and assumes that value is only created when it is reflected in individual

perceptions and positive evaluations. Thereby, it adds specific content and a

microfoundation to the VBA framework’s value dimension. The anchoring in

human basic needs also provides a holistic understanding because value creation

and value destruction in different dimensions are included. Therefore,

embedding economic value in a broader notion of value creation can also help

overcome the separation fallacy present in a lot of thinking on business and

society. Overall, the revised model’s contribution consists of a well


100

microfounded value notion for the business and society field and a broadening

of the accountability and balance dimensions.

The revised model opens up avenues for exciting new theorizing about

the role of business in society. This theoretical endeavor can lead to

theoretically derived hypotheses on the antecedents and consequences of public

value creation being tested empirically at a later stage of the research process.

Further, this study highlights the field’s core question: What makes business

valuable for society?

Anchoring the role of business in society in basic human needs and

individuals’ perception not only adds to theoretical thinking, but has many

important implications for practitioners as well. New questions emerge

regarding the existing tools and corporate functions that firms use to position

themselves in society, such as sustainability reports and CSR departments.

Firms need to ask themselves whether the public appreciates these efforts in

terms of public value recognition and whether they are at all valuable if the

public does not acknowledge them. Here, corporate executives and

communicators face new strategic challenges.

Taking all these aspects into consideration, we conclude that public

value is a promising candidate to resolve enduring problems and stumbling

blocks in the business and society field, especially concerning the understanding

of value.


101

REFERENCES

Aguinis, Herman, and Ante Glavas. 2012. “What We Know and Don’t Know

About Corporate Social Responsibility: A Review and Research Agenda.”

Journal of Management 38(4): 932–968.

Antal, Ariane B., and André Sobczak. 2013. “Culturally Embedded

Organizational Learning for Global Responsibility.” Business & Society

Early online publishing: 1–32.

Barney, Jay B., and Teppo Felin. 2013. “What are Microfoundations?” Academy

of Management Perspectives 27(2): 138–155.

Bowen, Howard R. 1953. Social Responsibilities of the Businessman. New

York: Harper.

Bryson, John, M., Barbara C. Crosby, and Laura Bloomberg. 2014. “Public

Value Governance: Moving beyond Traditional Public Administration and

the New Public Management.” Public Administration Review 74(4): 445–

456.

Carroll, Archie B. 1991. “The Pyramid of Corporate Social Responsibility:

Towards the Moral Management of Organizational Stakeholders.” Business

Horizons: 39–48.

Carroll, Archie B. 1994. “Social Issues in Management Research.” Business &

Society 33(1): 5–25.

Carroll, Archie B. 1998. “The Four Faces of Corporate Citizenship.” Business &

Society Review 100(1): 1–7. Carroll, Archie B. 2010. “The Business Case for

Corporate Social Responsibility: A Review of Concepts, Research and

Practice.” International Journal of Management Reviews 12(1): 85–105.

Castelló, Itziar, and Josep Lozano. 2009. “From Risk Management to

Citizenship Corporate Social Responsibility: Analysis of Strategic Drivers of

Change.” Corporate Governance 9(4): 373–385.


102

Crabtree, James. 2004. “The Revolution that Started in a Library.” The New

Statesman 17(826): 54–56.

Davis, Ian. 2005. The Biggest Contract. The Economist. May 26, 2005.

De George, Richard, T. 1987. “The Status of Business Ethics: Past and Future.”

Journal of Business Ethics 6: 201–211. Drucker, Peter F. 1942/2002. The

Future of Industrial Man. Piscataway, NJ: Transaction Publishers.

Drucker, Peter F. 1973. Management: Tasks, Responsibilities, Practices. New

York: Harper Business Edition.

Economist, The. 2012. “Global Trends for 2013: A Top Ten for Business

Leaders” (November 26). Available at

http://www.economist.com/blogs/theworldin2013 /2012/11/global-trends-

2013. Accessed November 30, 2013.

Elkington, John B. 1999. Cannibals with Forks: The Triple Bottom Line of 21st

Century. Gabriola Island: New Society Publishers.

Epstein, Seymour. 1989. “Values from the Perspective of Cognitive-

Experiential Self-Theory.” In Social and Moral Values, ed. Nancy

Eisenberg, Janusz Reykowski, and Ervin Staub, 3–22. Hillsdale, NJ:

Erlbaum.

Freeman, R. Edward. 1984. Strategic Management: A Stakeholder Approach.

Boston: Pitman.

Freeman, R. Edward. 1994. “The Politics of Stakeholder Theory.” Business

Ethics Quarterly 4(4): 409–421.

Freeman, R. Edward, Andrew C. Wicks and Bidhan Parmar. 2004. “Stakeholder

Theory and ‘The Corporate Objective Revisited.’” Organization Science

15(3): 364–369.


103

Garriga, Elisabet, and Domènec Melé. 2004. “Corporate Social Responsibility

Theories: Mapping the Territory.” Journal of Business Ethics 53(1/2): 51–

71.

Gomez, Peter, and Timo Meynhardt. 2012. “More Foxes in the Boardroom:

Systems Thinking in Action.” In Systemic Management for Intelligent

Organizations: Concepts, Models-Based Approaches and Applications, ed.

Stefan N. Grösser and René Zeier, 83–98, Heidelberg: Springer.

Goodpaster, Kenneth E. 1997. “Business Ethics.” In Blackwell Encyclopedic

Dictionary of Business Ethics, ed. Patricia Werhane and R. Edward

Freeman, 51–57. Cambridge, MA: Blackwell.

Hahn, Tobias, Ans Kolk, and Monika Winn. 2010. “A New Future for

Business? Rethinking Management Theory and Business Strategy.” Business

& Society 49(3): 385–401.

Haken, Hermann. 1977. Synergetics: An Introduction Nonequilibrium Phase

Transitions and Self-Organization in Physics, Chemistry and Biology.

Berlin: Springer Berlin.

Haken, Herman, and A. Mikhailov, eds. 1993. Interdisciplinary Approaches to

Nonlinear Complex Systems. Berlin: Springer-Verlag.

Hansen, Erik G. 2010. Responsible Leadership Systems: An Empirical Analysis

of Integrating Corporate Responsibility into Leadership Systems.

Wiesbaden: Gabler.

Harris, Jared D., and R. Edward Freeman. 2008. “The Impossibility of the

Separation Thesis.” Business Ethics Quarterly 18(4): 541–548.

Herzberg, Frederick. 1968. “One More Time: How Do You Motivate Your

Employees?” Harvard Business Review 46: 53–62.

Heyde, Johannes E. 1926. Wert. Eine philosophische Grundlegung. Erfurt:

Verlag Kurt Stenger.


104

Joyner, Brenda E., and Dinah Payne. 2002. “Evolution and Implementation: A

Study of Values, Business Ethics, and Corporate Responsibility.” Journal of

Business Ethics 41(4): 297–311.

Lee, Min-Dong P. 2008. “A Review of the Theories of Corporate Social Re-

sponsibility: Its Evolutionary Path and the Road Ahead.” International

Journal of Management Reviews 10(1): 53–73. Maslow, Abraham H. 1943.

“A Theory of Human Motivation.” Psychological Review 50: 370–396.

Matten, Dirk, Andrew Crane, and Wendy Chapple. 2003. “Behind the Mask:

Revealing the True Face of Corporate Citizenship.” Journal of Business

Ethics 45(1–2): 109–120.

Matten, Dirk, and Jeremy Moon. 2008. “‘Implicit’ and ‘Explicit’ CSR: A

Conceptual Framework for a Comparative Understanding of Corporate

Social Responsibility.” Academy of Management Review 33(2): 404–424.

Melé, Domènec. 2008. “Corporate Social Responsibility Theories.” In The

Oxford Handbook of Corporate Social Responsibility, ed. Andrew Crane,

Abagail McWilliams, Dirk Matten, Jeremy Moon, and Donald S. Siegel, 47–

82. Oxford: Oxford University Press.

Meynhardt, Timo. 2009. “Public Value Inside: What is Public Value Creation?”

International Journal of Public Administration 32 (3–4): 192–219.

Meynhardt, Timo. Forthcoming. “Public Value: Turning a Conceptual

Framework into a Scorecard.” In Public Value and Public Administration,

ed. John. M. Bryson, Barbara C. Crosby, and Laura Bloomberg. Georgetown

University Press.

Meynhardt, Timo, and Steffen Bartholomes. 2011. “(De)Composing Public

Value: In Search of Basic Dimensions and Common Ground.” International

Public Management Journal 14 (3): 284–308.


105

Meynhardt, Timo, and Peter Gomez. 2014. “Do It Yourself! Building Blocks for

New Pyramids of Corporate Social Responsibilities.” Unpublished

manuscript.

Meynhardt, Timo, and Camillo von Müller 2013. “‘Wir wollen Werte schaffen

für die Gesellschaft’—Der Public Value im Spannungsfeld zwischen

Aktienwert und Gemeinwohl. Eine Fallstudie am Beispiel der Deutsche

Börse AG.” Zeitschrift für öffentliche und gemeinwirtschaftliche

Unternehmen—Journal for Public and Nonprofit Services 36(2–3): 119–149.

Meynhardt, Timo, and Camillo von Müller 2014. “Towards a Dynamic

Interpretation of Subjective and Objective Values.” In

Managementperspektiven für die Zivilgesellschaft des 21. Jahrhunderts, ed.

Camillo von Müller and Claas- Philip Zinth, 45–65. Wiesbaden: Springer.

Moore, Mark H. 1995. Creating Public Value: Strategic Management in

Government. Cambridge, MA: Harvard University Press.

Moore, Mark H. 2013. Recognizing Public Value. Cambridge, MA: Harvard

University Press.

Moore, Mark H., and Sanjeev Khagram 2004. “On Creating Public Value: What

Business Might Learn from Government about Strategic Management.”

Working paper of the Corporate Social Responsibility Initiative, Kennedy

School of Government. Cambridge, MA: Harvard University.

Morgeson, Frederick P., Herman Aguinis, David A. Waldman, and Donald S.

Siegel. 2013. “Extending Corporate Social Responsibility Research to the

Human Resource Management and Organizational Behavior Domains: A

Look to the Future.” Personnel Psychology 66: 805–824.

Néron, Pierre-Yves. 2010. “Business and the Polis: What Does It Mean to See

Corporations as Political Actors?” Journal of Business Ethics 94: 333–352.


106

Parmar, Bidhan L., R. Edward Freeman, Jeffrey S. Harrison, Andrew C. Wicks.,

Lauren Purnell, and Simone de Colle. 2010. “Stakeholder Theory: The State

of the Art.” Academy of Management Annals 4: 403–445.

Porter, Michael E., and Mark R. Kramer 2006. “Strategy and Society: The Link

Between Competitive Advantage and Corporate Social Responsibility.”

Harvard Business Review (December). Available at

http://www.fsg.org/tabid/191/ArticleId/46/Default .aspx?srpush=true.

Porter, Michael E. and Mark R. Kramer. 2011. “Creating Shared Value.”

Harvard Business Review (January/ February). Available at

http://www.fsg.org/tabid/191/ArticleId/ 241/Default.aspx?srpush=true.

Rawls, John. 1971. A Theory of Justice. Cambridge: Harvard University Press.

Schaltegger, Stefan, Florian Lüdeke-Freund, and Erik G. Hansen. 2012.

“Business Cases for Sustainability: The Role of Business Model Innovation

for Corporate Sustainability.” International Journal of Innovation and

Sustainable Development 6(2): 95–119.

Schwartz, Mark S., and Archie B. Carroll. 2008. “Integrating and Unifying

Competing and Complementary Frameworks: The Search for a Common

Core in the Business and Society Field.” Business & Society 47(2): 148–186.

Tuzzolino, Frank, and Barry Armandi. 1981. “A Need-Hierarchy Framework for

Assessing Corporate Social Responsibility.” Academy of Management

Review 6: 21–28.

Walsh, James P. 2005. “Book Review Essay: Taking Stock of Stakeholder

Management.” Academy of Management Review 30 (2): 426–452.

Weber, Max. 1919. Politik als Beruf. Lecture transcript available at http://www

.textlog.de/weber_politik_beruf.html.


107

Wheeler, David, Barry Colbert, and R. Edward Freeman. 2003. “Focusing on

Value: Reconciling Corporate Social Responsibility, Sustainability and a

Stakeholder Approach in a Network World.” Journal of General

Management 28(3): 1–27.

Windsor, Duane. 2001. “The Future of Corporate Social Responsibility.” The

International Journal of Organizational Analysis 9(3): 225–256.

Winn, Monika I. 2001. “Building Stakeholder Theory with a Decision Modeling

Methodology.” Business & Society 40(2): 133–166.

World Commission on Environment and Development. 1987. Our Common

Future. Oxford: Oxford University Press.

108

109

PAPER 2:

PUBLIC VALUE COMMONS: EVIDENCE FROM THE

SWISS BANKING INDUSTRY

Timo Meynhardt, Pepe Strathoff, & Steven A. Brieger

January 2016

Abstract

Using a new and unique Swiss dataset, we investigate the relationship

between individual banks’ public value and the banking industry’s public value,

as well as the relationship between familiarity with a bank and its public value.

Empirically, we find that industry public value has a major influence on

individual firm public value and that the more familiar respondents are with

firms, the more positively they evaluate them. In addition, we find that the

strong relationship between industry and firm public value is not significantly

weakened if respondents are more familiar with a particular firm. Accordingly,

we confirm that public value is a common good within the Swiss banking

industry. In terms of theory, the paper contributes to a better understanding of

the conceptual similarities and differences between organizational reputation

and public value. Our study’s most important practical implication is that

collective approaches to managing a bank’s public value are needed at the

industry level.

Publication: tbd


110

INTRODUCTION

Organizational reputation (OR) is attracting increasing attention from

management researchers in different areas. Although the concept is intuitively

appealing and seems quite straightforward, it has deep-seated complexities,

especially concerning the emergence of reputation (Lange, Lee, & Dai, 2011).

Reputation is objectively held by an organization. However, third parties create

this reputation subjectively in processes that involve cognitions and evaluations

(cf. Suchman, 1995; Lange et al., 2011). In this regard, the public value (PV)

construct appears – at first sight – to be particularly similar to organizational

reputation. An organization’s public value, while objectively held, is a result of

the public’s evaluation of an organization’s contribution to society (Meynhardt,

2009). Whereas the axiological structure of reputation and public value is

similar, the content of the evaluations differs. In the reputation literature,

particular attention has been paid to the issue of “reputation commons,” defined

as situations where the reputation of an industry is seen as a common good

shared by all firms in that particular industry with all the problems associated

with a good that is rivalrous, but non-excludable (e.g. free riding) (King, Lenox,

& Barnett, 2002). Owing to the similarities between the constructs

organizational reputation and public value, especially concerning their structural

aspects, this paper is aimed at determining whether public value has a similar

industry pattern. Our research question is therefore: How are industry and firm

public value related?

We have chosen the Swiss banking sector as our empirical setting due

to its enormous importance for the Swiss economy and society. We see this

sector as a case in point, which lends itself perfectly to study the research

question at hand.

The remainder of the paper proceeds as follows: First, we outline the

main ideas of the public value construct and discuss in depth how it relates to

Paper 2: Public Value Commons

111

organizational reputation, with a special emphasis on carving out commonalities

and differences. Based on this, we, secondly, develop our hypotheses and the

model to be tested. Third, we report our data collection and analysis methods.

Thereafter, we present our results and discuss the limitations and the

implications for research and practice. Finally, we conclude.

THEORETICAL BACKGROUND

Public value research is an emerging field (Bryson, Crosby, &

Bloomberg, 2014; 2015) originally developed in the public management field

(e.g. Moore, 1995; Meynhardt & Bartholomes, 2011). The concept is

increasingly also used in the (private sector) management literature (e.g.

Strathoff, 2015; Meynhardt, Chandler, & Strathoff, forthcoming). Public value

rankings draw widespread media attention (www.gemeinwohl.ch/atlas;

www.gemeinwohlatlas.de/atlas) and a number of firms have conducted public

value studies (e.g. Swiss insurance Mobiliar, German stock exchange operator

Deutsche Börse AG, and plastics producer Bayer Material Science – for an

overview see Meynhardt, 2015: 158-159). In the following, we first describe the

theoretical considerations of public value. In a second step, we discuss the

commonalities and the differences between the public value construct and the

organizational reputation construct.

Public Value

The public value notion is a novel way of understanding the value that

organizations create for society (Moore, 1995; Meynhardt 2009, 2015). The

notion builds on a perspective according to which every organization not only

creates economic value, but also values in a number of dimensions, i.e. public

value contributes to producing and reproducing society. Public value is based on

the Druckerian idea that every organization, whether a firm, a public


112

administration, or an NGO, influences how well society functions (Drucker,

1992). Initially, public value emerged in public sector management research,

where the concept was presumed to help public managers with their strategic

decision making (Moore, 1995). According to the father of public value, Mark

Moore, “managers must satisfy some kinds of desires and operate in accord with

some kinds of perceptions” (1995: 52).

This is where Meynhardt’s (2009, with Bartholomes 2011) notion of

public value, which positions public value creation in the fulfillment of basic

human needs, becomes relevant. According to Meynhardt (2008, 2009, with

Bartholomes 2011, 2015), the public value approach explicitly takes the

culturally contingent nature of corporate responsibility (Campbell, 2007) and its

reflection in stakeholders’ and the general public’s subjective evaluations into

account.

In this view, a firm’s responsibility to society comprises creating value

for the public – public value. Organizations shape and co-create our experience

of society and social reality. Public value has been defined as “[a]ny impact on

shared experience about the quality of the relationship between the individual

and ‘society’” (Meynhardt, 2009: 212). At a deeper level, public value can, as a

regulative idea, be seen as a new way to consider notions such as the common

good, public interest, or bonum commune, in a managerial way; that is, a way

that complements a legal perspective and the operationalization of philosophical

ideas. Public value is thus:


113

“…situated in relationships between the individual and

‘society,’ founded in individuals, constituted by subjective

evaluations against basic needs, activated by and realized

in emotional-motivational states, and produced and

reproduced in experience-intense practices.” (Meynhardt,

2009: 212).

We follow Meynhardt’s public value theory as a way of understanding

firms’ role in society. In this respect, we outline three main pillars of the theory,

which, in a later step of our argument, will prove important for carving out the

commonalities and the differences between the public value construct and the

reputation construct, and for developing our hypotheses.

1. Value is in the relationship. One ongoing debate about values

relates to the question regarding where value resides (Rescher, 1969). Following

the value philosopher Johannes Erich Heyde (1926), value is conceptualized as

a result of the relationship between a subject valuing an object and the valued

object. Value thus describes this subject-object relationship. In Heyde’s words,

“Value is the relationship” (1926: 77, own translation). Without a subject, there

is no value. In this sense, value is subjective. When a subject relates to an object

during the act of valuation or evaluation, value emerges. Value is “value for a

subject” (Heyde, 1926: 46f., own translation). In this view, value is always

bound to relationships and is always relative. Given this philosophical

perspective, public value is also a result of a relationship. Public value is thus a

relational concept.

2. The public is inside. The “public” part of public value also needs

explicit consideration. Public value is about the individual’s experience of a

social environment, including, but certainly not limited to, experiences with

organizations. Many different institutions may contribute to an individual’s

perception of ‘the public.’ Following Meynhardt, such a reference to the ‘whole’

(e.g. society, community, the common good, etc.) is an abstraction “generated

on the basis of experiences made in daily practices, analytical insight, and all


114

sorts of projections as to complex phenomena” (2009: 204). This concept of

“public” follows Vaihinger’s idea that individuals and groups need to act ‘as if’

(Vaihinger, 1911/2008).

“This constantly (re)negotiated, tested, or invented

‘operational fiction’ forms the ‘Gestalt,’ ‘generalized

other’ (Mead 1934/1962) or ‘quasi-object’ (Latour 2000),

as the reference point for action. The ‘state,’ the ‘market,’

or the ‘society’ are emerging functional generalizations,

often necessary to arrange and interpret data or events in

a meaningful way. Following Luhmann, meaningfulness

then is ‘a self-referential attitude towards complexity’

(Luhmann 1984, p. 107, own translation).” (Meynhardt,

2009: 205).

The public is, thus, seen as a reality construction emerging at the level

of human experience – the public is inside.

3. Public value is grounded in basic needs. Since public value views

organizations’ contribution to society as the result of individual perceptions and

the ensuing evaluations, it needs to answer the question regarding which

psychological processes drive these perceptions. In other words, public value

requires a psychological microfoundation at the level of individuals. In public

value theory, four different basic needs are related to public value. Table 1

illustrates the conceptual link.


115

TABLE 1

Relationship between Basic Needs and Basic Value Dimensions

Basic need for … Translation into a motivation for …

(examples)

Basic value

dimension

positive self-

evaluation

positive self-concept and self-worth

consistent relationship between self and

environment

feeling of high self-esteem (in social

comparison)

Moral-

ethical

maximizing

pleasure and

avoiding pain

positive emotions and avoidance of negative

feelings

flow experience

experience of self-efficacy due to action

Hedonistic-

aesthetical

gaining control

and coherence

over one’s

conceptual system

understanding and controlling one’s

environment

predictability of cause and effect

relationships

ability to control expectations to cause

desired outcomes

Utilitarian-

instrumental

positive

relationships

relatedness and belongingness

attachment, group identity

optimal balance between intimacy and

distance

Political-

social

Note: adapted from Meynhardt 2009: 203

Each of the four needs forms the background of public value

evaluations. Put differently, basic needs provide the psychological source for

public value to become a social reality. Once established, a public value


116

functions as a resource for need fulfillment and development. For example, if a

firm is perceived to be an ethical company, this perception may serve as a

reference for the formation of an individual’s attitude to morality. Given the

broad spectrum of a person’s social experience, any specific product, service, or

corporate behavior, will potentially impact his or her generalized image of

society and the values that “really count” in a given social context.

To summarize: Public value is a construct that links an organization’s

societal impact to human experience. As such, public value is linked to

relationships between individuals and organizations, in which “images” of

society are formed and modified. As a consequence, public value only exists in

the eye of the beholder. Although it is contingent on perception (“public value is

what the public values”), public value is not arbitrary, but is firmly grounded in

basic needs. These motivational dispositions serve as reference points for

recognizing and evaluating public value. Basic needs form the psychological

sources of public value, which in turn serves as a resource for the individual to

fulfill basic needs.

Organizational Reputation

As was outlined above, public value is based on very specific

theoretical assumptions. Nevertheless, adjacent research streams, especially the

one on organizational reputation, exhibit commonalities and patterns that also

apply to public value. Therefore, in this section, we describe the organizational

reputation construct, in order to provide a basis for carving out how public value

is related to the organizational reputation concept in the subsequent section. In

their comprehensive literature review on organizational reputation, Lange et al.

(2011) warn that despite its apparent intuitive meaning and attractiveness, the

organizational reputation concept is actually quite complex. These authors

identify three prevalent understandings of organizational reputation in the

literature.


117

According to certain authors, organizational reputation describes how

well known an organization is. This “being known” understanding of

organizational reputation is apparent in Shamsie’s (2003: 199) definition of

organizational reputation “as the level of awareness that the firm has been able

to develop for itself.” Interestingly, this view takes into account whether an

organization is known or not, irrespective of an observer’s evaluations or

judgements (Lange et al., 2011). A number of authors do not limit their concept

of corporate reputation to this dimension, but include it as just one dimension in

their multidimensional understanding of organizational reputation. Rindova,

Williamson, Petkova, and Sever (2005) add this familiarity dimension to a

perceived quality dimension, which represents stakeholders’ evaluation of an

organization in respect of specific attributes. Other authors argue that reputation

and prominence are actually distinct constructs. Boyd, Bergh, and Ketchen

(2010: 6) argue that: “The distinction between prominence and reputation is that

prominence refers to the degree to which an organization is visible and well

known, whereas reputation involves an assessment of being good, bad, or

somewhere in between”. Yet other authors conceptualize familiarity not as a

dimension, but see it as an important antecedent of organizational reputation. In

an experimental setting, Brooks, Highhouse, Russell, and Mohr (2003) find a

positive relation between familiarity and organizational reputation. However,

they also find that more well-known firms are evaluated more ambiguously due

to more information being available. Turban, Lau, Ngo, Chow, and Si (2001)

have shown that familiarity is positively associated with a firm’s reputation as

an attractive employer. The finding that increased exposure to an object, i.e.

familiarity, is associated with positive evaluations of that object, has also been

found to be a general psychological mechanism (Zajonc, 1968).

Another prevalent understanding of the organizational reputation

construct is what Lange et al. (2011) call “being known for something.”

Differing from the “being known” notion, this understanding of organizational

reputation explicitly entails an observer’s evaluative judgement of an


118

organization that goes beyond knowing or not knowing it. Importantly, this

understanding of reputation focusses on organizations’ reputation for very

specific characteristics (Fischer & Reuber, 2007), such as the quality of their

products (Rindova et al., 2005). As this understanding of organizational

reputation focusses on certain components of an organization that are relevant to

particular stakeholder groups, it has been called the “componential perspective

on organizational reputation” (Fischer & Reuber, 2007: 57). Love and Kraatz

(2009: 317-318) see this view of corporate reputation as focused on an

organization’s “technical efficacy” in delivering tangible outputs that evaluating

audiences value, because it helps them fulfill their material needs. Accordingly,

organizations are seen “as a means to audiences’ parochial ends.” This is a

rather narrow instrumental view that limits organizational reputation to very

particular attributes identified by stakeholders with a narrowly defined self-

interest as their basis of evaluation. This view is clearly very different from the

rather holistic public value construct presented above. Therefore, the “being

known for something” perspective on corporate reputation seems less suited to

further our understanding of industry dynamics in public value creation.

A third conceptualization of corporate reputation is what Lange et al.

(2011) term “generalized favorability.” They define it as “an overall,

generalized assessment of the organization’s favorability” (2011: 159). This

understanding of reputation includes valuations of an organization by perceivers

who take multiple organization attributes into account; they do not limit their

judgements to an organization’s performance regarding meeting their parochial

interests (Fischer & Reuber, 2007). Clearly, such a more encompassing

perspective on an organization is more in line with the public value concept than

the rather narrow “being known for” perspective. Authors who subscribe to this

view of organizational reputation build on Fombrun’s classic (1996: 72)

definition of reputation as “a perceptual representation of a company’s past

actions and future prospects that describes the firm’s overall appeal to its key

constituents when compared to other leading rivals.” This definition entails two


119

important theoretical ideas: First, it clarifies that reputation is a relational

construct that emerges when a firm’s, or another organization’s (object of

evaluation) key constituents (evaluating subjects) evaluate it postively. In this

sense, reputation can be seen as outsiders’ “affective evaluation” of an

organization (Rhee & Valdez, 2009). Second, the definition clarifies that the

reputation construct entails a competitive aspect, with evaluations based on a

comparison of organizations and with certain organizations having a

higher/lower reputation than others.

Love and Kraatz (2009: 316) point out that “reputational assessments

are shaped by an organization’s symbolic conformism with external, socially

constructed standards and categories.” In this sense, organizational reputation

stems from an organization’s cultural fit in its given environment. This also

means that reputation is not universal and absolute, but contingent on the

cultural context. There is a complex interplay between cultural factors,

constituents’ judgement and organizational self-representation. Therefore, even

though reputation is objectively held by an organization, it is subjectively

created through cognitions and evaluations of third parties (Lange et al., 2011,

cf. Suchman, 1995).

Public Value and Organizational Reputation – Quite similar, but not quite

the same

The aim of this section is to carve out the commonalities and the

differences between organizational public value and organizational reputation.

This comparison will, in the next step, enable us to derive hypotheses on

patterns of public value creation already identified in organizational reputation

research.

Table 2 provides an overview of the commonalities and differences

between organizational public value and organizational reputation, and the

dimensions according to which we compare the two constructs.


120

TABLE 2

Comparing Public Value and Organizational Reputation

Dimension Public Value Organizational

Reputation

Axiology Relational Relational

Strategic Relevance Yes Yes

Locus of Control External External

Frame of reference for

evaluations /

microfoundation

Explicit microfoundation Implicit / lacking

microfoundation

Process Dynamics Synergetic dynamics Dynamic, no system theory

Measurement unit /

baseline,

No absolute zero, not

absolute, no adding up

No absolute zero, not

absolute, no adding up –

but: inherent

competitiveness

Role of evaluator Citizen Stakeholder

Dominant logic Contribution logic to

common good, integrate

the individual with society

Logic of conduct and

meeting expectations

Axiology. Axiology is a field of value theory dealing with the inner

structure of values (evaluating subject, evaluated object, basis, and character of

evaluation). In terms of axiology, public value and organizational reputation

share an important similarity: Both are relational in the sense that they only

emerge when a perceiver judges an organization. In public value theory, the

contruct’s building on value philosophy, which sees a relational understanding


121

of value creation as the middle ground between value subjectivist and value

objectivist positions, establishes this relationality (Heyde in Meynhardt, 2009).

Similarly, organizational reputation is the result of how a public evaluates a

firm’s activities. According to Fombrun and Shanley (1990: 234), “[p]ublics

construct reputations.” Hence, the two constructs are relational in terms of their

basic axiology, as they only emerge when a public (subject) judges an

organization (object).

Strategic relevance. Whether organizations have a high or low public

value matters to them. Case study research has shown that public value

potentials are associated with growth opportunities (Meynhardt, Strathoff,

Beringer, & Bernard, 2015), and that public value risks over time translate into

financial risks. Interestingly, a portfolio analysis has shown that firms with a

higher public value outperform those with a lower public value on the

stockmarket (Berndt, Bilolo, & Meynhardt, 2015). Creating public value can be

regarded as the raison d’être of public sector organizations (Moore, 1995), and

if they are not seen to do so, their very existence is endangered (Meynhardt &

Bartholomes, 2011). Having a high public value is therefore strategically very

relevant for organizations. In this regard, organizational reputation is no

different. Reputation has been found to be a valuable asset for firms, because it

reduces stakeholder uncertainty (Benjamin & Podolny, 1999) and enables firms

to charge price premiums (Shapiro, 1983), leading to an increased financial

performance (Roberts & Dowling, 2002). Therefore, we note that both public

value and organizational reputation are material and strategically highly relevant

assets for organizations.

Locus of control. Given the strategic importance of public value and

organizational reputation as “social approval assets” (Pfarrer, Pollock, &

Rindova, 2010: 1131), it is striking that both represent assets which

organizations cannot control. Organizations legally own (or are in a contractual

relationship with) other strategically relevant assets, such as financial means,

patents, and other production factors, which they can control. However, a high


122

public value, or a favorable reputation, might be similarly important – as the

preceding paragraph showed – but an organization cannot control this, despite a

certain notion of ownership, as when we talk about “Nestlé’s public value” or

“BMW’s reputation.” The notion of organizational reputation often implies that

organizations are anthromorphized (Davies, Chun, da Silva, & Roper, 2003;

Dowling, 2001), because they are viewed as coherent and purposive entities

(Love & Kraatz, 2009) with certain character traits, such as reliability or

trustworthiness (Fombrun, 1996). We suggest giving this anthromorphization

another twist by framing the separation of public value, or organizational

reputation, ownership and control, phenomenon as an instance of an external

locus of control. This idea, which originates from personality psychology,

describes individuals’ psychological disposition to attribute the outcomes of

events in their life to external factors, and to subsequently believe that they have

less control over their fate (Rotter, 1954, 1966). This applies to organizations

which are dependent on a high public value and a favorable reputation, but feel

that they cannot control either and are dependent on the evaluating public’s

judgement. Yet, we should bear in mind that even though organizations cannot

control their public value, they can mostly at least influence it. Public value is

not a subjectivist construct limited to arbitrary individual sentiments, but is

relational in the sense that an evaluator and and evaluated object (the

organization) co-produce value. As organizations have control over most of

their actions and communications, they can at least influence the evaluated

object side (themselves). Lange et al. (2011) point out that even though

reputation is objectively held by an organization, it is subjectively created

through third party cognitions and evaluations. Consequently, we can state that

in terms of public value and organizational reputation, organizations’ locus of

control is clearly external.

Frame of reference for evaluations – microfoundation. We have

established that both public value and organizational reputation emerge through

perceivers’ judgements; a logical next question is therefore: On what are these


123

judgements based and how do individuals form – consciously or unconsciously

– judgements of organizations? In other words, we have to determine the two

concepts’ microfoundation in individual cognitive processes (Barney & Felin,

2013). Meynhardt (2009) has microfounded the public value construct. He

points out that value “must show up in phenomena of emotional-motivational

states described via psychological constructs” (2009: 200). Meynhardt identifies

psychology’s basic needs research, especially Epstein’s (1989, 2003) four-

dimensional approach, as a suitable reference point for public value evaluations

and translates this dimensional structure into his four dimensions of public value

(Meynhardt, 2009). Public value obviously has a microfoundation in

psychological basic needs. In contrast, the field of organizational reputation

needs more work on the underlying cognitive processes. Reputation has been

described as “affective evaluation” (Cable & Graham, 2000: 929; Rhee &

Valdez, 2009: 146), but reputation research still has to “get inside the heads of

those whose perceptions determine reputation” (Barnett & Pollock, 2012: 13).

Consequently, as far as a clear microfoundation is concerned, the public value

literature has developed more explicit foundations than the organizational

reputation field.

Measurement unit/baseline. When refering to PV and OR, we tend to

make statements such as “organization A has a high PV,” or “the reputation of

firm A is higher than that of firm B.” We thus think about the constructs as

measured on some form of ordinal scale, which allows comparisons of which

organizations have more or less PV/OR. At the same time, statements such as

“organization X has a public value of five,” or “organization Y’s reputation is

100,” make no sense: No measurement unit is associated with either construct,

and neither of the scales has a zero point. We can, however, compare

organizations. This is frequently done in public value

(www.gemeinwohl.ch/atlas, http://www.gemeinwohlatlas.de/atlas) and

reputation (http://www.reputationinstitute.com/research/Global-RepTrak-100)

rankings. This approach to measuring and comparing corporate reputations is in


124

line with Fombrun and Shanley’s (1990) understanding of reputation as the

result of a competition between firms to maximize their social status. By

signaling to managers how successful they are in this competition, reputational

rankings constitute a significant form of normative control (Fombrun &

Shanley, 1990). We see this inherently competitive aspect of corporate

reputation as another form of the construct’s relationality. Reputation is thus not

only the result of a public’s evaluation of an organization, but is always a

comparative evaluation (Iwin, 1975) of a particular organization and its

competitors. On the contrary, public value theory is more open regarding the

character of the evaluation. Certainly, comparative evaluations may be done,

which public value rankings show, but the theory is also open to absolute

judgements of a single organization’s public value. This openness to absolute

evaluations stems from the concept’s microfoundation, which allows for making

judgements of basic needs fulfillment as opposed to competitive judgements of

other firms, and also from the idea that there is no fixed amount of public value

for which firms compete, but that public value potentials are theoretically

unlimited, as organizations might always find new ways of enhancing

individuals’ experience of community and society.

Process Dynamics. The process dynamics criterion refers not only to

the process of an overall PV/OR emerging from individual evaluations, but also

to the PV’s and OR’s stability and change over time. PV’s process dynamics are

synergetic. In this sense, PV is a systemic property (an order parameter)

emerging from the interaction between and micro-macro links of individual

evaluations. As an emergent phenomenon, PV takes a qualitatively different

“gestalt” at the macro level; that is, more than – yet contingent on – individual

evaluations. In turn, as a systemic order parameter, PV influences, or even

determines, the structure and content of individual evaluations (enslavement; for

a detailed account see Meynhardt, 2015; Meynhardt et al., forthcoming).

Accordingly, PV’s stability over time depends on the strength of the order

parameter and the extent to which new developments can (de-)stabilize the


125

system (Ebeling & Feistel, 1994; Haken, 1977, 1984; Meynhardt et al.,

forthcoming). In contrast, OR’s process dynamics are less clear. OR’s dynamic

nature has been identified as an important feature of the construct and as a field

deserving more research attention (Lange et al., 2011; Kraatz & Love, 2006).

Kraatz and Love (2006: 344) point to a “need to study reputation dynamically,

and the specific need to examine how it is affected by various corporate

actions.” These authors provide guidelines for such studies and discuss how the

issue can be addressed in terms of methodology and multi-theory approaches in

the reputation field. However, while acknowledging OR’s dynamic nature, there

is no link to a broader formal theory of system behavior that would enable a

more systematic, theory-driven conceptualization of OR dynamics.

Role of evaluator. According to Fombrun and Shanley (1990: 235),

“reputation reflects firms’ relative success in fulfilling the expectations of

multiple stakeholders.” The individual who evaluates whether a firm has met

her or his expectations is, accordingly, in a stakeholder role. Typical stakeholder

roles include those of customers, employees, suppliers, or local communities. In

terms of judgements, these groups’ relative position to the evaluated object – the

firm – is a major determinant of reputation evaluation. In contrast, public value

sees the evaluator in the role of a citizen, who evaluates whether a firm

contributes to her or his positive experience of the social collective. The

“public” is seen as some sort of mental representation of community and society

that goes beyond the definition of a dyadic stakeholder relationship, that

permeates vested interests, and allows for a more impartial evaluation

(Meynhardt, 2009). This does not necessarily imply that public value statements

are entirely positionally independent. However, compared to reputational

evaluations, stakeholder group affiliations play a less pronounced role.

Dominant logic. Finally, we compare the two constructs’ respective

dominant logic, their implicit underlying mechanism. On the one hand,

organizational reputation follows a logic of conduct. A reputation is built when

a firm conducts itself as the evaluator expects. Accordingly, Sorenson (2014)


126

states that reputation actually only matters in terms of the experience attributes

of a good or service, i.e. the attributes of a good or service that cannot be (fully)

evaluated prior to consumption, but whose quality the consumer can only judge

after consuming this good or service (e.g. the taste of a bottle of Bordeaux). On

the other hand, public value follows a logic of value creation towards the

common good (Meynhardt, 2008). Public value describes the mediating role of

organizations by connecting the individual to the social collective. Public value

emerges through individual evaluations (as is also acknowledged in the

methodological approach chosen in this research). However, on a higher level,

public value also describes organizations’ value creation towards the common

good. In this sense, public value follows a Druckerian (1973) logic of

contribution.

PUBLIC VALUE COMMONS – HYPOTHESES

DEVELOPMENT

Industry and Firm Public Value

The above discussion has shown that there are a number of parallels

between public value and reputation regarding structural factors – most notably

the relational nature, the importance of (external) perceptions for both

constructs, and the absence of any absolute measurement unit. In contrast, in

terms of content, the constructs describe different things, because reputation is

about the fulfillment of stakeholder expectations, whereas public value is about

the public evaluation of organizations’ contribution to the common good.

However, the structural similarities call for an examination of whether a

particular structural feature of corporate reputation – reputation commons – also

applies to public value.

Tirole (1988) coined the notion collective reputation, which was

subsequently applied to the industry level (Barnett & Hoffman, 2008). Firms


127

facing a reputation commons (King et al., 2002) are dependent on the reputation

of the industry as a whole, and any firm actions that harm or support the

industry’s reputation have consequences for all firms in the industry. Reputation

commons are especially pronounced when the firms within one industry are

very similar, leading to situations where the most ardent competitors are also the

most interdependent in terms of sharing an industry reputation (Yue & Ingram,

2012).

The cognitive tendency to extend judgements of a certain object to

other, seemingly similar, objects – the halo-effect (Thorndike, 1920) – increases

our confidence that this is a pattern not only applicable to reputation, but also to

public value. Public value’s roots lie in evaluation processes (Meynhardt, 2009),

which makes it prone to the halo-effect. Another psychological factor that was

applied in industry reputation research (Yue & Ingram, 2012), the availability

heuristic (Rothbart, Fulero, Jensen, Howard, & Birrell, 1978), can also be

applied to public value with a similar reasoning: If an individual has any

information about a firm, it will use this piece of information when evaluating

similar organizations and the industry as a whole, instead of endeavoring to

acquire additional information.

Such patterns will not only apply to the overall public value evaluation,

but also to the dimensional level, as well as to judgements of a firm’s public

value trend. For this reason, we assume that a firm’s public value is related to its

industry’s public value. We develop the first set of hypotheses as follows:

Hypothesis 1a: Industry public value is positively

related to individual firm public

value.

Hypothesis 1b: Industry public value in the public

value dimensions is positively

related to individual firm public

value in the respective dimensions.


128

Hypothesis 1c: The public value trend of the

industry is positively related to the

public value trend of individual

firms.

The Role of Familiarity with a Firm

As outlined above, in reputation research, familiarity with a firm has

been found to be a central factor for understanding organizational reputation

dynamics (Mariconda & Lurati, 2000). In this context, familiarity has been

defined as “a general overall level of acquaintance with the firm, most likely

without reference to a specific, identifiable source of information” (Luce,

Barber, & Hillman, 2001: 401). Most studies find a significant positive

relationship between familiarity and reputational evaluations (Mariconda &

Lurati, 2000). Fombrun and van Riel (2004: 104) state that “the more familiar

you are to the public, the better the public rates you.”

Accordingly, we again use the organizational reputation analogy for

public value and posit that the public value that a firm creates is higher if

respondents are more familiar with this firm. This is also very much in line with

a basic tenet of public value theory, which assumes that value is not just

delivered, but perceived (Meynhardt, 2009), and in line with the general

psychological disposition to evaluate familiar objects more positively (Zajonc,

1968). Therefore, we hypothesize that familiarity is positively related to public

value (H2a). In addition, we assume that familiarity with a firm negatively

moderates the relationship between industry and firm public value (see H1a-c

above), because a higher familiarity with a specific firm will result in a more

firm-specific public value evaluation and weaken the influence of industry

public value commons (H2b).

Hypothesis 2a: Familiarity with a firm is

positively related to public value.


129

Hypothesis 2b: The relationship between industry

public value and individual firm

public value is weaker the more

familiar respondents are with a

specific firm.

Figure 1 summarizes the theoretical model with the hypothesized

relationships between the core variables. This model is subsequently tested

empirically.

FIGURE 1

Theoretical Model

METHODS

Data Collection

An organization-level construct measured at the individual level.

Owing to the theoretical positioning of public value as value that is created


130

when individuals evaluate how organizations influence their experience of

community and society, we measure public value at the level of individuals.

Nonetheless, these measurements inform us about organizational and industry-

level public value patterns, as these categories are objects of evaluation.

Accordingly, this method section includes a description of our sample of

respondents, as well as of our sample of evaluated organizations.

Sample. The empirical testing of our hypotheses was based on Swiss

survey data collected over a three-week period in February/ March 2014. A

professional market research firm with access to a sample of 50,000 Swiss

respondents, forming a representative sample of the Swiss population, collected

the data. In an online survey, 4,483 subjects were asked how they evaluate the

public value of major Swiss organizations. The respondents were given a

random set of up to six organizations that they knew to evaluate. Each

organization was evaluated by at least 400 respondents. After evaluating

specific organizations, the respondents were asked to evaluate industries along

similar measures. Our respondents are between 18 and 88 years old (mean 48),

50.8% are female, they all come from German-speaking cantons (a relative

majority of 1028 respondents are from Zurich) and roughly 47.4% percent are

married, while 29.7% are single. 36.7% of the respondents are employed and do

not have leadership responsibility, whereas 21% are employed and do have

some leadership responsibility. 21.5% of the respondents are pensioners. The

others are self-employed, still in education, homemakers, or unemployed. The

majority of the respondents (53.8%) has completed a professional

apprenticeship with vocational school. 15.5% of the respondents hold a degree

from a university of applied sciences; 13.2% graduated from university. 12.2%

of the sample indicated Mittelschule (high school) as their highest education

level. The remaining respondents have a lower education. The respondents’

median gross household income ranges between 6,000 and 9,000 Swiss Francs

per month.


131

Measures for public value. We relied on measures used in earlier

studies to assess firms’ and industries’ public value. The set of items used had

been validated in a former study (Meynhardt & Bartholomes, 2011). We rely on

single-item measures of each public value dimension (see table 3), as these have

been shown to load strongly on the respective factors in preliminary studies, and

are also advantageous in terms of research efficiency. Using single-item

measures is in line with the recommendations by Wanous, Reichers, and Hudy

(1997) and Nagy (2002). The respondents were asked to indicate on a 1 (full

disagreement) to 6 (full agreement) Likert scale whether they agreed with the

statements.

TABLE 3

Items for Measuring Public Value

Dimension Item

Organization/Industry XY…

Moral-ethical …behaves decently.

Hedonistic-aesthetical …contributes to the quality of life in Switzerland.

Utilitarian-instrumental …does good work in its core business.

Political-social …contributes to social cohesion in Switzerland.

Additionally, we measured the public value trend with the following

item: “The public value orientation of organization/industry XY during the last

two years has…” Respondents were asked to indicate on a 1 (decreased

strongly) to 6 (increased strongly) Likert scale how they assessed the public

value trend of a particular organization or industry. In our questionnaire, all

items were given in German. We included a filter to make sure that respondents


132

only evaluate organizations that they knew. First, each respondent was given a

list of approximately 20 organizations and asked to indicate how familiar he or

she is with the organizations on a 1 (not familiar with at all) to 6 (very well

familiar with) Likert scale. This is in line with familiarity measures from

reputation studies (Mariconda & Lurati, 2000). In a second step, each

respondent was given up to six randomly chosen organizations with which he or

she is familiar (a self-reported familiarity of “4” or higher). A qualitative and a

quantitative pretest (n=60) showed that the questions were well understood and

that public value indeed seems to correspond to mental patterns of evaluating

organizations.

Control variables. We controlled for gender, age, highest level of

education, media consumption, internet usage, and whether the participant

works or not. We used a dummy for gender, called “Gender” (female=1,

men=0). In our sample, 51% were female and 49% were male. The participants

answering the “banking” questions ranged from 18 years to 87 years, and the

average age was 48 years (SD=16.0). The highest degree of education is

considered in a categorical variable “Education” (coefficients are not listed for

simplicity). A distinction was made between 6 categories ranging from the

lowest category “primary school” to the highest category “university, college,

Federal Institute of Technology, polytechnic university.” We considered the

media consumption (“Media”) and internet usage (“Internet”) of each

participant to control for the information each participant could have had about

the organizations or sectors. The respondents were asked to rate how often they

read specific newspapers. The answer categories in this respect ranged from

“daily/almost daily” (coded 1) to “never” (coded 6). The variable “Media” is

dummy-coded with 1 if the respondent mentioned reading one the newspapers

“daily/almost daily” or “several times a week,” and 0 if the respondent indicated

that he or she reads one of the presented newspapers fewer than several times a

week. The mean of the variable is 0.42 (SD=0.49), which implies that 42% of

the respondents read at least one newspaper several times a week.


133

The variable “Internet” has 6 categories ranging from “daily” (coded 1)

to “rarely” (coded 6). A mean of 1.26 (SD=0.60) shows that most people use the

internet frequently. The last control variable “Employed” is a dummy for people

who work (coded 1). Students attending school or universities, housewives and

homemakers, unemployed persons, and pensioners were coded 0. In our dataset,

64% (M=0.64; SD=0.48) of the respondents are employed. Table 4 provides an

overview of the descriptive statistics and correlations.

TABLE 4

Descriptive Statistics and Correlations

Variable Mean SD Min Max 1 2 3 4 5 6 7

1. Industry PV 3.24 1.25 1 6 1.00

2. Age 47.42 15.96 18 87 -0.02 1.00

3. Gender (Female=1) 0.51 0.50 0 1 0.09 -0.13 1.00

4. Employed (Dummy) 0.64 0.48 0 1 -0.06 -0.38 -0.06 1.00

5. Media (Dummy) 0.42 0.49 0 1 -0.03 0.14 -0.16 -0.02 1.00

6. Internet 1.24 0.58 1 6 0.00 0.05 0.10 0.00 -0.08 1.00

7. Education 3.81 1.20 1 6 -0.09 -0.07 -0.02 0.04 0.07 -0.13 1.00

Note: n=2762

Sample of firms and industry affiliation. We collected data on public

value creation in respect of 47 Swiss firms. The firms included in the survey

were chosen by means of the following procedure: First, we compiled a list of

Switzerland’s biggest firms. This list included the 50 largest Swiss firms in

terms of sales, all firms listed on the major Swiss stock market index SMI, as

well as the ten biggest insurance companies in terms of gross inflow of

premiums, the ten largest banks in terms of balance sheets, and the ten biggest

cooperatives (“Genossenschaften”) in terms of sales. This yielded a list of 79


134

firms. Second, more than 800 people from German-speaking Switzerland

assessed how well they knew these firms. They were given an alphabetic list

with the firms’ logos and were asked to assess their knowledge on a 1 (not

familiar) to 6 (very familiar) Likert scale. This was done in a street intercept

survey. Third, we calculated the mean of all the respondents’ valuations of each

organization. The values ranged from 5.93 for Migros (major retailer) to 1.27

for Trafigura (commodity trading). Fourth, we ranked all 79 firms according to

how well-known they are. We defined “3” as the cut-off value. Consequently,

every company with a mean value of less than “3” (rounded) was excluded from

the sample. This approach generated a sample of the 47 largest and best-known

Swiss firms. These firms were assigned to industries according to the NOGA

2008 scheme in its medium-grained SNA/ISIC-Aggregat A*38 version as used

by the Swiss Federal Statistical Office (Bundesamt für Statistik, 2008). Two

researchers did this classification independently and then compared their

classifications. Finally, an expert of the Federal Statistical Office approved the

classifications.

Data Analysis

We calculated the public value score as the unweighted average of the

four public value dimensions on an organizational and sectoral level. We used

OLS regression analysis to determine the banking sector effects on the

perception of individual banks (Hypotheses 1a, 1b, and 1c). The OLS equation

for H1a is arranged in the form: PV Bank = α + β1 × PV Banking Industry + β2

× Age + β3 × Gender (Female=1) + β4× Employed (Yes=1) + β5 × Media

(Consumer=1) + β6 × Internet (Very frequent use=1) + β7 × cat. Education + Ɛ,

where Ɛ is the error term and α is the constant. We used the same OLS

regression structure for hypotheses 1b and 1c. The only difference is that we

used the single public value dimension variables. For example, the OLS

equation for the Moral dimension is: Moral Bank = α + β1 × Moral Banking

Industry + xiβ + Ɛ. We find evidence of heteroscedasticity in the residuals of the


135

regressions in respect of the Raiffeisen and ZKB banks. To control this, we also

ran the regression models for both banks with robust standard errors, found

similar results, and no differences in significance. The control variables are

expressed by the vector xiβ. Hypothesis 1c was tested by using a variable of the

dataset called “Public value trend.” The equation form is: Public value trend

Bank = α + β1 × Public value trend Banking Sector + xiβ + Ɛ, where the control

variables are expressed by the vector xiβ.

We tested the hypothesis 2a and 2b by adding a categorical variable to

consider how familiar people are with the respective bank in our presented OLS

regression, with the public value of each bank as the dependent variable. We

assume that higher familiarity with a bank goes hand in hand with higher public

value. Thus, our null hypothesis states that knowledge about a firm has no

effect, while the alternative hypothesis states that it has a significant effect on

the public value. The last hypothesis, 2b, was tested by including an interaction

term (familiarity with a bank × PV Banking Industry) in the final multivariate

model.

RESULTS

The banking industry has a mean public value score of 3.24 (n=2841).

Furthermore, the respondents think that the banking industry does not work

morally, which the score of 2.68 for the moral-ethical dimension illustrates.

Contrary to this, the hedonistic-aesthetical dimension is evaluated most

positively (3.70). Interestingly, five of the seven banks in our sample have a

higher public value than the industry, showing that, in general, the banking

industry is accepted less than its members are. There are only two banks, UBS

and HSBC, whose public value is lower than the banking industry’s public

value. Moreover, the moral-ethical dimension, and the utilitarian-instrumental

dimension of all the individual banks are more positively evaluated than the

industry’s public value dimensions. Table 5 provides an overview of the public


136

value (overall, dimensional, and trend) means of all the banks in the sample, as

well as of the banking industry.

TABLE 5

Means of Banking Industry and Banks

Pu

bli

c V

alu

e

Mo

ral-

eth

ical

Po

liti

cal-

soci

al

Uti

lita

rian

-

inst

rum

enta

l

Hed

on

isti

c-

aest

het

ical

Pu

bli

c v

alu

e tr

end

N

Banking Industry 3.24 2.68 3.11 3.46 3.70 3.42 2841

Banks

Raiffeisen 4.85 5.11 4.53 5.18 4.57 4.33 402

ZKB 3.99 4.10 3.60 4.40 3.86 3.50 436

BKB 3.97 4.09 3.74 4.26 3.78 3.54 405

Julius Bär 3.53 3.56 3.17 4.03 3.35 3.00 407

CS 3.44 3.43 3.16 3.69 3.48 3.04 422

UBS 3.19 3.13 2.93 3.48 3.23 2.88 408

HSBC 3.14 3.38 2.53 3.71 2.94 2.58 409

Note: Public Value = (Moral-ethical + Political-social + Utilitarian-instrumental +

Hedonistic-aesthetical) / 4

The regression results presented in table 6 show the significant effect

the banking sector has on the perception of banking sector institutions, which

indicates that the public value of the banking industry can partly explain the

public value of an individual bank. The coefficients of the explanatory variable

“Industry PV (Public Value)” are positive, highly significant on a 1% level, and

vary between banks, implying that the influence of the banking sector public

value on the public value of a particular institution is stronger in respect of some


137

banks, such as UBS and Credit Suisse, than in respect of others, such as

Raiffeisen. The high R2 of 0.52 for CS and 0.54 for UBS indicates that the

model built for banking industry public value explains more than half of the

variation in these firms’ public value. Interestingly, the public value of the

banking sector does not adequately explain the variation in the public value of

the cooperative bank Raiffeisen, which has the highest public value (4.85) of all

the banks in the sample, showing that the sector’s public value influences this

bank to a lesser extent. It can thus be confirmed that higher public value of the

banking industry leads to higher public value of individual banks.


138

TABLE 6

Regression Results

Banks

BKB CS HSBC Raiff-

eisen UBS ZKB

Julius

Bär

Industry PV 0.43*** 0.70*** 0.44*** 0.30*** 0.80*** 0.54*** 0.45***

Age 0.00 0.00 0.00 0.00*** 0.00 0.00 0.01***

Gender

(Female=1) 0.31*** 0.04 0.29*** 0.14 -0.1 -0.14* 0.07

Employed 0.27** 0.08 -0.03 0.16 0.06 -0.10 -0.06

Media 0.04 0.23** 0.13 -0.02 0.23** 0.259*** 0.11

Internet -0.12 -0.05 0.032 0.05 0.04 0.00 0.17**

Education Yes Yes Yes Yes Yes Yes Yes

Constant 1.56 0.95** 0.58 2.88*** 0.45 1.16** 1.28***

N 394 408 399 395 395 429 393

R2 0.28 0.52 0.33 0.17 0.54 0.4 0.3

Adj. R2 0.258 0.506 0.31 0.145 0.529 0.38 0.277

F 13.46 38.97 17.29 7.07 41.23 24.85 16.03

Notes: Dependent variable: Public Value of the individual bank; * p<0.10, ** p<0.05,

*** p<0.01


139

All the coefficients of the four dimensional items and of the public

value trend item are positive and highly significant on a 1% level (see table 7).

This result supports hypotheses 1b and 1c. Hence, we confirm H1a-c.

TABLE 7

Regression Results

Banks

BKB CS HSBC Raiff-

eisen UBS ZKB

Julius

Bär

Moral-ethical 0.283*** 0.551*** 0.313*** 0.174*** 0.657*** 0.376*** 0.370***

Political-social 0.336*** 0.555*** 0.286*** 0.275*** 0.556*** 0.428*** 0.317***

Utilitarian-

instrumental 0.329*** 0.614*** 0.384*** 0.233*** 0.697*** 0.441*** 0.399***

Hedonistic-

aesthetical 0.385*** 0.615*** 0.416*** 0.311*** 0.687*** 0.506*** 0.386***

Public value

trend 0.384*** 0.664*** 0.399*** 0.262*** 0.696*** 0.553*** 0.431***

Notes: Dependent variable = Dimension of the individual bank. The dimension of the

Banking Industry is the explanatory variable. *** p<0.01

The results of the control variables included in our analysis are also

shown in table 6. The media variable shows positive, highly significant

coefficients in respect of CS, UBS, and ZKB, i.e. their public value increases if

a respondent is better informed due to reading newspapers. Moreover, females

show a more positive evaluation of the BKB and HSBC, but a more negative

one of the UBS. With a few exceptions, being employed, internet usage, and age

show no clear pattern. Employed people evaluated the BKB higher than


140

unemployed people. Respondents who use the internet more frequently,

evaluated the four dimensions of Julius Bär higher, while age has a significant

positive impact on the public value of Raiffeisen and Julius Bär. Overall, the

control variables can only explain 2-4% of the variation in banks’ public value.

Hypothesis 2a, which posits that higher familiarity with a bank leads to

a higher public value, was also confirmed. The results of the regression model

(1) presented in table 8 demonstrate the relationship between higher public

value and higher familiarity with a bank if the reference category 4 indicates

that the bank is known. Nevertheless, knowing a firm increases its public value.

All the coefficients of category 6 (the respondent is very familiar with a bank)

are positive and highly significant in respect of all banks. In respect of the banks

Julius Bär, Zürcher Kantonalbank, HSBC, and BKB, the coefficients of the fifth

category are also significant. Further, there is no evidence to support the

assumption made in hypothesis 2b that the relationship between the banking

industry public value and individual bank public value is moderated by the

respondent’s degree of familiarity with a bank. The interaction term is not

significant for any bank, which the results of regression model (2) in table 8

show. Hence, we reject H2b.

Overall, our model can explain between 29% (for Raiffeisen) and 56%

(for UBS) of the public value variance. Industry public value and the

respondents’ familiarity with a bank thus seem to be major factors in

determining the public value of banks.

TABLE 8

Regression Results

Banks

BKB CS HSBC Raiffeisen UBS ZKB Julius Bär

(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)

Industry PV 0.41*** 0.40*** 0.69*** 0.63*** 0.44*** 0.39*** 0.28*** 0.24*** 0.77*** 0.72*** 0.52*** 0.49*** 0.44*** 0.52***

Age -0.00 0.00 0.00 0.00 0.00 0.00 0.01** 0.01** 0.00 0.00 0.00 0.00 0.01*** 0.01***

Gender 0.27** 0.27*** 0.03 0.02 0.31*** 0.31*** 0.11 0.11 -0.11 -0.12 -0.14 -0.13 0.08 0.09

Employed 0.30*** 0.32*** 0.09 0.08 -0.01 0.00 0.15 0.16* 0.03 0.03 -0.07 -0.07 -0.08 -0.07

Media 0.02 0.00 0.21** 0.20** 0.12 0.09 0.03 0.04 0.16* 0.16 0.02 0.22** 0.11 0.12

Internet -0.12 -0.11 -0.03 -0.04 0.03 0.02 0.02 0.03 0.03 0.04 0.22** 0.05 0.20** 0.20**

Education Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Familiarity

4 Ref. Ref. Ref. Ref. Ref. Ref. Ref. Ref. Ref. Ref. Ref. Ref. Ref. Ref.

5 0.26** 0.38 0.13 -0.04 0.29*** 0.02 0.15 -0.18 0.11 -0.19 0.24** 0.28 0.23** 0.63**

6 0.66*** 0.43 0.27*** -0.05 0.29** -0.03 0.77*** 0.73** 0.45*** 0.33 0.51*** 0.27 0.58*** 1.09***

Interaction term

4

Ref.

Ref.

Ref.

Ref.

Ref.

Ref.

Ref.

5

-0.03

0.05

0.08

0.1

0.1

-0.01

-0.12

6

0.06

0.1

0.1

0.02

0.04

0.08

-0.16

Constant 1.06 2.43*** 0.94** 1.25*** 0.4 1.34*** 2.34*** 2.87*** 0.46 0.59* 1.06** 1.95*** 1.16*** 1.02***

N 394 394 408 408 399 399 395 395 395 395 429 429 393 393

R2 0.33 0.32 0.53 0.53 0.35 0.34 0.29 0.29 0.56 0.56 0.43 0.43 0.33 0.34

Adj. R2 0.31 0.30 0.51 0.51 0.33 0.32 0.26 0.27 0.55 0.55 0.42 0.41 0.31 0.32

F 14.33 16.44 33.91 39.94 15.75 17.83 11.85 14.04 55.07 45.01 24.42 28.30 15.61 17.48

Notes: Dependent variable: Public Value of the individual bank; * p<0.10, ** p<0.05, *** p<0.01


142

DISCUSSION

Limitations

Our study has limitations concerning the data collection method (online

survey), the type of data (cross-sectional), and the external validity concerning

the transferability of the findings to other industries or cultural settings. Since

industry and firm public value are measured in the same survey, common

method bias might be a problem (Podsakoff, MacKenzie, Lee, & Podsakoff,

2003). However, we have mitigated this problem by means of various

procedural techniques. In order to reduce people’s evaluation apprehension and

concerns regarding socially desirable behavior, we assured the respondents full

anonymity, stressed that there were no right or wrong answers in the

introductory text, and urged them to provide honest personal evaluations. In

order to control for the effects of the question order (context-induced mood,

priming) we rotated items randomly, while the list of organizations and

industries the respondents were asked to evaluate was also randomly determined

from the organizations that the respondent knows. Another way to reduce

method biases is by carefully constructing items that are unambiguous, specific,

and simple. In order to do so, we used measures from earlier studies (Meynhardt

& Bartholomes, 2011) that we adapted after extensive qualitative and

quantitative pretesting. By adopting these measures, we follow Podsakoff et al.

(2003), who recommend such an approach, especially when other remedies

(different data sources, separation of measurement) are not feasible.

As we used cross-sectional data to test our hypotheses, we need to be

cautious when attributing causal inference. Our hypotheses are drawn from

theoretical ideas. Nonetheless, other mechanisms than the ones envisioned

might come into play and cause the relationships we find. This might be due to

reversed causality, or an overlooked exogenous variable that is not part of our


143

analysis (Backhaus, Erichson, Plinke, & Weiber, 2008). Especially the

relationship between industry and firm public value might not be unidirectional,

but we can assume that firm public value also has an influence on industry

public value.

A third limitation concerns the external validity of our study. The

hypotheses that we could confirm, were confirmed for all banks in the sample.

This increases our confidence in the external validity of our results for other

banks in Switzerland. However, banking differs greatly from other industries in

its structure (more concentrated than, for instance, food production) and in its

public perception (negative and intense media scrutiny). Further studies should

therefore assess whether the findings can be generalized to other industries and

different cultural contexts.

Research Implications

Existing research on public value in the public sector, as well as in the

private sector, has concentrated on answering the question of what makes

particular organizations valuable to society, mainly by means of single case

studies (Meynhardt & von Müller, 2013; Meynhardt & Bartholmes, 2011;

Meynhardt et al., 2015). The present study is the first to draw on a unique

dataset of public value creation by different industries and is, hence, an

important development in public value research. This paper enables us, for the

first time, to systematically compare different organizations on the basis of their

public value creation. Our results clearly show that public value commons do

exist: Belonging to a certain industry largely predetermines an individual firm’s

public value. Further research should therefore systematically build on existing

case study evidence, as well as on our research to examine whether the pattern

we found in the banking industry also holds for other sectors. This might

include large-scale comparative quantitative studies like the present one, or in-

depth case studies of specific industry associations. Further, our data suggests

that some firms are more closely identified with their industry (e.g. UBS,


144

HSBC, and CS) than others (e.g. Raiffeisen). It might therefore be worth

exploring which factors determine the extent to which firm public value depends

on industry public value. Variables that might play a role include firm size,

market dominance, legal structure, and degree of internationalization.

Additionally, our conceptual comparison of public value and organizational

reputation opens up the potential for empirical research to include PV and OR

variables. Future studies should also include time series data to examine, for

instance, how stable/volatile the two measures are and how they contribute to

explaining performance differences between firms.

Practical Implications

The most important finding from the practitioner’s perspective is the

very strong relationship between banking industry and individual bank public

value. In the adjacent field of reputation management, this taring of all with the

same brush and the consequences thereof have been referred to as reputation

commons (Aldrich & Fiol, 1994; King et al., 2002). Our analysis shows a public

value commons in the Swiss banking industry. The public value of the industry

influences each bank significantly, but no collective action is undertaken to

foster a favorable public perception of the industry as a whole. Banks need to

decide between a collective and a competitive public value management

strategy. Interestingly, increasing the public’s knowledge and information about

one’s company does increase its public value (H2a), but does not have a

significant influence on the dominant role of industry public value (rejected

H2b). In reputation management research, different factors have been identified

that allow firms to engage in either collective or competitive reputation

management (Winn, MacDonald, & Zietsma, 2008). However, our findings

suggest that, as far as public value is concerned, collective public value

management is not an option, but a necessity. Therefore, a key managerial

implication of our research is that firms in an industry have to cooperate to

enhance their industry’s public value and, thus, their own. In order to do so,


145

firms will have to overcome their collective action problems (Olson, 1965). This

might be achieved if a dominant player takes the lead, or if some form of

institutionalization (e.g. via industry associations) occurs.

CONCLUSION

Public value is a new and promising concept in strategic management

research. It opens up new perspectives and relates different discourses in new

ways. This paper has shown that public value shares structural similarities with

the corporate reputation concept, but is different in terms of substance, as it

captures organizations’ contribution to the common good. The present research

shows that industry is a crucial factor in public value creation, which firms

cannot avoid. In fact, we found that public value commons exist and are shared

by the members of an industry. Our findings open up avenues for exciting

research and have important lessons for practitioners who want to enhance the

public value of their organizations.


146

REFERENCES

Aldrich, H. E., & Fiol, M. 1994. Fools Rush in? The Institutional Context of

Industry Creation. Academy of Management Review, 19(4): 645–670.

Backhaus, K., Erichson, B, Plinke, W., & Weiber, R. 2008. Multivariate

Analysemethoden: Eine anwendungsorientierte Einführung, 12th ed.,

Springer-Lehrbuch. Berlin: Springer.

Barnett, M., & Hoffman, A. J. 2008. Beyond Corporate Reputation: Managing

Reputational Interdependence. Corporate Reputation Review, 11(1): 1–9.

Barney, J. & Felin, T. 2013. What are microfoundations? Academy of

Management Perspectives, 27(2): 138-155.

Barnett, M. L. & Pollock, T. G. 2012. Charting the landscape of corporate

reputation research. In T. G. Pollock & M. L. Barnett (Eds.), The Oxford

Handbook of Corporate Reputation: 1-15. Oxford, UK: Oxford University

Press.

Berndt, T., Bilolo, C., & Meynhardt, T. 2015. Investing in legitimacy: A

performance analysis of public value stock portfolios. Paper presented at

ACRN Social and Sustainable Finance and Impact Investing Conference,

Oxford, UK, April 2015.

Benjamin, B. A., & Podolny, J. M. 1999. Status, Quality, and Social Order in

the California Wine Industry. Administrative Science Quarterly, 44(3):

563–589.

Boyd, B. K., Bergh, D. D., & Ketchen Jr., D. J. 2010. Reconsidering the

reputation–performance relationship: A resource-ased view, Journal of

Management, 36(3): 588-609.

Brooks, M. E., Highhouse, S., Russell, S. S., & Mohr, D. C. 2003. Familiarity,

ambivalence, and firm reputation: Is corporate fame a double-edged sword?

Journal of Applied Psychology, 88(5): 904-914.


147

Bryson, J. M., Crosby, B. C., & Bloomberg, L. 2014. Public Value Governance:

Moving Beyond Traditional Public Administration and the New Public

Management. Public Administration Review, 74(4): 445-456.

Bryson, J. M., Crosby, B. C., & Bloomberg, L. 2015. Public Value and Public

Administration. Washington, DC: Georgetown University Press.

Bundesamt für Statistik (BFS) 2008. NOGA 2008. Allgemeine Systematik der

Wirtschaftszweige: Erläuterungen. Bern: Bundesamt für Statistik.

Cable, D. M. & Graham, M. E. 2000. The determinants of job seekers’

reputation perceptions. Journal of Organizational Behavior, 21(8): 929-

947.

Campbell, J. L. 2007. Why Would Corporations Behave in Socially Responsible

Ways? An Institutional Theory of Corporate Social Responsibility. Academy

of Management Review, 32(3): 946–967.

Davies, G., Chun, R., da Silva, R. V., & Roper, S. 2001. The personification

metaphor as a measurement approach for corporate reputation. Corporate

Reputation Review, 4: 113-127.

Dowling, G. R. 2001. Creating Corporate Reputations, Oxford, UK: Oxford

University Press.

Drucker, P. F. 1973. Management: Tasks, Responsibilities, Practices. New

York: Harper & Row.

Drucker, P. F. 1992. The New Society of Organizations. Harvard Business

Review, 70(5): 95–105.

Ebeling, W. & Feistel, R. 1994. Chaos und Kosmos. Prinzipien der Evolution.



148

Epstein, S. 1989. Values from the perspective of cognitive-experiential self-

theory. In: Eisenberg, N., Reykowski, J., & Staub, E. (eds.), Social and

Moral Values: Individual and Societal Perspectives: 3-22. Hillsdale, NJ:

Lawrence Erlbaum Associates.

Epstein, S. 2003 Cognitive-experiential self theory of personality, In: Th.Millon,

M. L. Lerner, I. B. Weiner (eds.), Handbook of Psychology: Handbook of

Psychology, Vol. 5, Personality and Social Psychology: 159–184. New

York: John Wiley & Sons, Inc.

Fischer, E. & Reuber, R. 2007. The, the bad, and the unfamiliar: The challenges

of reputation formation facing new firms. Entrepreneurship Theory and

Practice, 31(1): 53-75.

Fombrun, C. J. 1996. Reputation: Realizing value from the corporate image.

Boston, Mass: Harvard Business School Press.

Fombrun, C. J. & Shanley, M. 1990. What’s in a name? Reputation building and

corporate strategy. Academy of Management Journal, 33(2): 233-258.

Fombrun, C. J. & van Riel, C. 2004. The reputational landscape. Corporate

Reputation Review, 1(1-2): 5-13.

Haken, H. 1977. Synergetics: Nonequilibrium Phase Transition and Self-

Organization in Physics, Chemistry and Biology. Berlin, Heidelberg, New

York: Springer.

Haken, H. 1984. Can Synergetics Be of Use to Management Theory? Springer


Heyde, J. E. 1926. Wert: eine philosophische Grundlegung. Erfurt: Stenger.

Iwin, A. A. 1975. Grundlagen der Logik von Wertungen. Berlin: Akademie-

Verlag.


149

King, A. A., Lenox, M. J., & Barnett, M. 2002. Strategic responses to the

reputation commons problem. In Organizations, Policy, and the Natural

Environment: Institutional and Strategic Perspectives: 393-406. Stanford

University Press.

Kraatz, M. S. & Love, E. G. 2006. Studying the dynamics of reputation: A

framework for research on the reputational consequences of corporate

actions. Research Methodology in Strategy and Management, 3: 343-383.

Lange, D., Lee, P. M., & Dai, Y. 2011. Organizational Reputation: A Review.

Journal of Management, 37(1): 153–184.

Latour, B. 2000. We have never been modern, 5th ed. Harlow, Essex: Pearson

Education.

Love, E. G. & Kraatz, M. S. 2009. Character, conformity, or the bottom line?

How and why downsizing affected corporate reputation. Academy of


Luce, R. A., Barber, A. E., & Hillman, A. J. 2001. Good deeds and misdeeds: A

mediated model of the effect of corporate social performance on

organizational attractiveness. Business and Society, 40(4): 397-415.

Luhmann, N. 1984. Soziale Systeme: Grundriss einer allgemeinen Theorie,

Suhrkamp Taschenbuch Wissenschaft, Vol. 666. Frankfurt am Main:

Suhrkamp.

Mariconda, S. & Lurati, F. 2014. Being known: A literature review on media

visibility, public prominence and familiarity with implications for reputation

research and management. Corporate Reputation Review, 17(3): 219-236.

Mead, G. H., Morris, C. W., & Morris, C. W. (Eds.) 1934/1962. Works of

George Herbert Mead. Chicago: University of Chicago Press.

Meynhardt, T. 2008. Public Value – oder: was heißt Wertschöpfung zum

Gemeinwohl? dms – der moderne staat, 2: 73–91.


150

Meynhardt, T. 2009. Public value inside: What is public value creation?

International Journal of Public Administration, 32(3-4): 192–219.

Meynhardt, T. 2015. Public Value: Turning a Conceptual Framework into a

Scorecard. In: Bryson, J. M., Crosby, B. C., & Bloomberg, L. (eds.), Public

Value and Public Administration: 147-169. Washington, DC: Georgetown

University Press

Meynhardt, T., & Bartholomes, S. 2011. (De)Composing Public Value: In

Search of Basic Dimensions and Common Ground. International Public

Management Journal, 14(3): 284–308.

Meynhardt, T., & von Müller, C. 2013. „Wir wollen Werte schaffen für die

Gesellschaft“ – Der Public Value im Spannungsfeld zwischen Aktienwert

und Gemeinwohl. Eine Fallstudie am Beispiel der Deutsch Börse AG. ZögU

– Zeitschrift für öffentliche und gemeinwirtschaftliche Unternehmen,

36(2-3): 119–149.

Meynhardt, T., Strathoff, P., Beringer, L. & Bernard, S. 2015. FC Bayern

Munich: Creating Public Value between Local Embeddedness and Global

Growth. Cranfield, UK: The Case Centre.

Meynhardt, T., Chandler, J. D., & Strathoff, P. (forthcoming). Systemic

principles of value co-creation: Synergetics of value and service ecosystems.

Journal of Business Research. Conditionally accepted for publication.

Moore, M. H. 1995. Creating public value: Strategic management in

government. Cambridge, Mass: Harvard University Press.

Nagy, M. S. 2002. Using a single-item approach to measure facet job

satisfaction. Journal of Occupational and Organizational Psychology,

75(1): 77–86.


151

Olson, M. 1965. The logic of collective action: Public goods and the theory of

groups, Harvard economic studies, Vol. 124. Cambridge, MA: Harvard

University Press.

Pfarrer, M. D., Pollock, T. G., & Rindova, V. P. 2010. A tale of two assets: The

effects of firm reputation and celebrity on earning surprises and investors’

reactions. Academy of Management Journal, 53(5): 1131-1152.

Podsakoff, P. M., MacKenzie, S. B., Lee, J.-Y., Podsakoff, N. P. 2003.

Common Method Biases in Behavioral Research: A Critical Review of the

Literature and Recommended Remedies. Journal of Applied Psychology,

88(5): 879–903.

Rescher, N. 1969. Introduction to value theory. Englewood Cliffs, NJ:

Prentice-Hall.

Rhee, M., & Valdez, M. E. 2009. Contextual factors surrounding reputation

damage with potential implications for reputation repair. Academy of

Management Review, 34(1): 146–168.

Rindova, V. P., Williamson, I. O., Petkova, A. P., & Sever, J. M. 2005. Being

good or being known: An empirical ehxamination of the dimensions,

antecedents, and consequences of organizational reputation. Academy of


Roberts, P. W., & Dowling, G. R. 2002. Corporate reputation and sustained

superior financial performance. Strategic Management Journal, 23(12):

1077–1093.

Rothbart, M, Fulero, S., Jensen, C., Howard, J & Birrell, P. 1978. From

individual to group impressions: Availability heuristics in stereotype

formation. Journal of Experimental Social Psychology, 14(3): 237-255.

Rotter, J. 1954. Social learning and clinical psychology. New York: Prentice-

Hall.


152

Rotter, J. 1966. Generalized expectancies of internal versus external control of

reinforcements. Psychological Monographs, 80.

Shamsie, J. 2003. The context of dominance: An industry-driven framework for

exploiting reputation. Strategic Management Journal, 24(3): 199-215.

Shapiro, C. 1983. Premiums for High Quality Products as Returns to

Reputations. The Quarterly Journal of Economics, 98(4): 659–679.

Sorenson, O. 2014. Status and reputation: Synonyms or separate concepts?

Strategic Organization, 12(1): 62-69.

Strathoff, P. 2015. The VBA Model and Public Value: Filling the Value Gap.

Business & Professional Ethics Journal, 33(4): 297-319.

Suchman, M. C. 1995. Managing Legitimacy: Strategic and Institutional

Approaches. Academy of Management Review, 20(3): 571-610.

Thorndike, E. L. 1920. A constant error in psychological ratings. Journal of

Applied Psychology, 4(1): 25–29.

Tirole, J. 1988. The theory of industrial organization. Cambridge, MA: MIT

Press.

Turban, D. B., Lau, C.-M., Ngo, H.-Y., Chow, I. H. S., & Si, S. X. 2001.

Organizational attractiveness of firms in the People’s Republic of China: A

person-organization fit perspective. Journal of Applied Psychology, 86(2):

194-206.

Vaihinger, H. 1911/2008. The Philosophy of “As If.”. Oxon: Routledge.

Wanous JP, Reichers AE, Hudy MJ. 1997. Overall job satisfaction: how good

are single-item measures? Journal of Applied Psychology, 82(2): 247–252.


153

Winn, M. I., MacDonald, P., & Zietsma, C. 2008. Managing Industry

Reputation: The Dynamic Tension Between Collective And Competitive

Reputation Management Strategies. Corporate Reputation Review, 11: 35–

55.

Yue, L. Q. & Ingram, P. 2012. In T. G. Pollock & M. L. Barnett (Eds.), The

Oxford Handbook of Corporate Reputation: 278-296. Oxford, UK: Oxford

University Press.

Zajonc, R. B. 1968. Attitudinal effects of mere exposure. Journal of

Personality and Social Psychology, Monograph Supplement, 9(2): 1-27.

154

155

PAPER 3:

PUBLIC VALUE AND HAPPINESS: EVIDENCE FROM

PUBLIC ADMINISTRATION IN SWITZERLAND

Timo Meynhardt, Pepe Strathoff, & Steven A. Brieger

January 2016

Abstract

In public management research, the focus in the public value debate has

been on public administration organizations’ broader societal outcomes. Public

value describes how public administrations form a vital part of the social

context in which people develop and grow. However, there has not yet been an

analysis of the way in which public administration contributes to happiness. In

this paper, we empirically analyze the relationship between people’s happiness

and the public value of public administration. Our approach is based on a unique

Swiss survey dataset comprising 870 individuals. Using ordered logit

regression, we find support for a positive relationship between public

administration’s public value and happiness. We also find preliminary evidence

that the relationship between a value-creating public administration sector and

self-reported happiness is stronger for public administration employees. We

discuss the implications of our findings for public sector performance

measurement and the economic models that explain well-being.

Publication: tbd


156

INTRODUCTION

The quality of institutions has been found to be an important factor to

explain people’s life satisfaction and happiness.1 In their studies, economists

have consistently demonstrated that individual-level factors (e.g. psychological

traits, health), socioeconomic factors (income, level of education,

unemployment), and macroeconomic conditions (inflation, unemployment rate)

play a major role when it comes to explaining happiness. At the same time,

institutional factors, such as the development of democratic institutions and the

degree of autonomy on the local level, are important to explain why some

people are happier than others (Frey and Stutzer 2002). Consequently,

institutions make up a vital part of the social context in which people develop

and grow.

It is curious to note that public management research has not explicitly

acknowledged the importance of public sector institutions in discussions of

people’s life satisfaction. There is some research on how public sector

organizations influence the well-being of their employees (e.g. Berry 2011) and

how well-being can be measured to design public policy (Forgeard,

Jayawickreme, Kern, and Seligman 2011), but research regarding public sector

organizations’ external influence on the communities and societies they serve

has been sorely lacking. The present study is an attempt to close this gap. The

research question is: What is the relationship between public administration’s

public value and people’s happiness?

We address this question and contribute to closing the gap in the

literature by systematically analyzing the impact of public administration’s

1 In the following, we use the terms “life satisfaction” and “happiness” interchangeably. We

use the term “well-being” as a broader term that encompasses objective aspects of an individuals’s life and circumstances, as well as the subjective evaluation of life

satisfaction/happiness.

Paper 3: Public Value and Happiness

157

broader societal outcomes (public value) on individuals’ happiness. In so doing,

in order to include public sector institutions’ perceived performance as

measured by their public value, we expand the model that economists have

developed in happiness research (Frey and Stutzer 2002). We propose using the

concept of public value to link the debate in economics to public sector

management, because public value focuses explicitly on the manner in which

public administration creates value for society (Moore 1995; Meynhardt 2009).

Our empirical approach is based on a new and unique dataset of the public value

creation by major Swiss organizations and institutions.

The paper proceeds as follows: First, we review the literature on both

happiness research in economics and (public) organizations and well-being. We

introduce the public value concept as a way to link the well-being discourse in

economics to public management research. Having linked the discourses to each

other, we derive hypotheses and develop a theoretical model that we

subsequently test. Third, we describe our data collection and analysis

procedures. Fourth, we present our empirical findings. Finally, we discuss our

results, point out the study’s potential limitations, and conclude the paper.

BACKGROUND

Happiness Research in Economics

It appears that a consensus has emerged from the well-being debate in

economics that a society’s well-being cannot be adequately measured by

exclusively examining economic indicators, such as the gross domestic product

(GDP). Stiglitz, Sen, and Fitoussi clarify that there is “an increasing gap

between the information contained in aggregate GDP data and what counts for

common people’s well-being” (2009, 12). Distinguishing between objective and

subjective indicators is one way of categorizing the non-economic approaches

that define and measure the quality of life (Diener and Suh 1997). Objective or


158

“social” indicators measure people’s objective life circumstances (e.g. the

degree of air pollution, the number of doctors per capita, or homicide rates).

These indicators quantitatively measure very specific features of societal well-

being, because there is an assumption that a good life’s characteristics can be

derived from normative ideals on the basis of a religious, philosophical, or other

system. Therefore, such approaches to understanding quality of life rely neither

on an individual’s subjective experience nor on the satisfaction of an

individual’s preferences. Brock (1993) calls these the “ideal theories” of a good

life.

By contrast, subjective indicators are based on the premise that, in

order to measure well-being, it is necessary “to directly measure the individual’s

cognitive and affective reactions to her or his whole life, as well as to specific

domains of life” (Diener and Suh 1997, 200). Consequently, these indicators

focus on individuals’ experience of their own lives, assuming that if an

individual experiences his or her life as good and desirable, then this

individual’s life is indeed good and desirable. According to Brock (1993, 270),

this understanding of the good life is derived from hedonist theories that “take

the ultimate good for persons to be the undergoing of certain kinds of conscious

experience.” The discourse on happiness and life satisfaction in economics and

the measurement that we use to assess public administration’s influence on

people’s well-being fall into the subjective indicator category. It is worth noting

that the term “happiness” includes both an emotional (“Were you happy

yesterday?”) and an evaluative (“Are you happy with your life as a whole?”)

component (Helliwell, Layard, and Sachs 2013). We focus on the latter, because

we seek to understand how public administration influences life satisfaction

overall.

A whole host of studies have indicated various factors that influence

happiness, and several authors have pointed out that personality disposition is

one of the most potent influences on average happiness levels. Strong control

beliefs (Lachman and Weaver 1998; Stocks, April, and Lynton 2012), optimism


159

(Seidlitz and Diener 1993; Arrosa and Gandelman 2015), and extroversion

(Lucas, Diener, Grob, Suh, and Shao 2001; Lü, Wang, Liu, and Zhang 2014;

Oerlemans and Bakker 2014) can have a positive impact on self-reported

happiness. A large number of studies (Ellison 1991; Diener 2000; Lu, Gilmour,

and Kao 2001; Inglehart and Welzel 2005; Diener, Lucas, and Smith 1999;

Welzel and Inglehart 2010; Pfeifer 2013; Braakmann 2014) have found that

socio-demographic factors, such as age, sex, ethnicity, religion, culture, health,

intelligence, education, values, and marital status, are also major determinants

of happiness. Several studies (Frey and Stutzer 2000a; Frey and Stutzer 2002;

Di Tella, MacCulloch, and Oswald 2003; Inglehart, Foa, Peterson, and Welzel

2008; Diener, Tay, and Oishi 2013; Welzel 2013; Senik 2014; Clark, Flèche,

and Senik 2015) have also found a positive association between economic

factors, such as income, GDP per capita, or economic growth, and happiness.

Frank (1999) emphasizes income relative to other people’s income as an

important variable to explain happiness. Easterlin (1995, 44) states that “raising

the incomes of all does not increase the happiness of all […] because the

material norms on which judgments of well-being are based increase in the

same proportion as the actual income of the society.” Unemployment and

inflation have been found to have a negative impact on self-reported happiness

(Clark and Oswald 1994; Di Tella, MacCulloch, and Oswald 2001; Dolan,

Peasgood, and White 2008; Dolan and Powdthavee 2012; Mikucka 2013;

Helliwell and Huang 2014; Helliwell, Huang, and Wang 2014).

Dorn, Fischer, Kirchgässner, and Souza-Poza (2007) observe a

significant, positive relationship between democracy and happiness. Frey and

Stutzer (2000a; 2000b; 2002) state that political variables – including the degree

of government decentralization (federalism), trust in government, and political

participation rights – are closely related to happiness. Higher trust in

government and more political participation rights affect human well-being

positively.


160

Public Value

The public value lens may offer additional perspectives on how public

administration influences happiness. Over the past two decades, there has been a

great deal of inquiry into the value-producing nature of public administration

and how it can be incorporated into performance measurement systems.

Moore’s seminal book Creating Public Value: Strategic Management in

Government (1995) rejuvenated Waldo’s (1948) idea that public administration

is deeply embedded in society’s value dynamics. At the heart of Moore’s (1995)

approach lies the strategic triangle, which posits that strategies in public

management have to be analyzed simultaneously from substantive, political, and

operational vantage points. Since Moore, “public value” has been developed as

a new notion to address the reflexive and pluralist perspectives on public

administration’s role in society.

Moore’s energizing thought was to shift the grounds of thinking about

public administration toward an entrepreneurial, value-creating perspective, and

this shift has inspired an entire field of study. According to Bryson, Crosby, and

Bloomberg (2014, 445), with public value, “[a] new public administration

movement is emerging to move beyond traditional public administration and

New Public Management. The new movement is a response to the challenges of

a networked, multi-sector, no-one-wholly-in-charge world and to the

shortcomings of previous public administration approaches.” These authors thus

describe a zeitgeist in the public sector that calls for new ways of thinking.

Against this background, public value has been viewed as a paradigm,

rhetoric, or a narrative, but also as a performance perspective (Alford and

O’Flynn 2009). We focus on it as a performance perspective, because we regard

public value’s impact on people as performance – whether intentional or not. In

public management, one of the public value discourse’s central ideas is that the

role of public organizations goes beyond Musgrave’s (1959) triad of stabilizing

the economy, (re-)distributing income, and allocating merit goods. Their role


161

also includes a normative function that shapes both how citizens perceive the

state’s legitimacy and trust in public action (Rainey 2003) and the relationships

between the individual and the social collective. Van Dooren, Bouckaert, and

Halligan (2015) argue that the public value literature can help us make sense of

government performance by adding substantive content to output and outcome

(i.e. performance) measures.

As Bryson et al.’s (2014) authoritative literature review shows,

multiple sources fuel the public value discourse. While Moore’s work considers

(from a managerial viewpoint) how to mobilize people to become aware of a

public dimension regarding certain actions or initiatives, Bozeman (2007) is

more concerned with the societal level, in particular the question of how to

reach a normative consensus on public values.

Interestingly, neither of the two authors above say anything about the

psychological mechanisms behind how people come to value public value, nor

about the basic needs against which such an evaluation takes place. However,

unless public value is grounded in psychological realities, it is almost

impossible to derive measures that can relate public value experience and

happiness on a subjective level. This is where Meynhardt’s (2009; 2015)

approach comes in. Bryson et al. (2014) present Meynhardt’s approach as one of

the major approaches in the field and make clear that while the approach is less

well-known, it is still quite important, especially because of its strong

psychological basis. Therefore, we follow this public value approach and

conceptualize public value as “[a]ny impact on shared experience about the

quality of the relationship between the individual and ‘society’” (Meynhardt

2009, 212). More concretely, public value creation “is situated in relationships

between the individual and ‘society,’ founded in individuals, constituted by

subjective evaluations against basic needs, activated by and realized in

emotional-motivational states, and produced and reproduced in experience-

intense practices” (ibid., 212).


162

Recognizing the relationship between individuals and society reveals

that institutions play an important role, whether intentional or not, in co-creating

people’s experience of society and social reality. Figuratively speaking, any

interaction with a public administration is an “encounter” with community and

society, and thus it contributes to people’s attitudes and images of the social

collective. In this sense, public value is created or destroyed when the

experiences and behaviors of individuals and groups are influenced in a way

that (de)stabilizes social order evaluations, the sense of community, or self-

determination in a societal context.

In this light, public value creation can be seen as a public

administration performance perspective (Meynhardt and Bartholomes 2011).

Typical performance criteria include output quantity, output quality, efficiency,

equity, and consumer satisfaction (Boyne 2002; 2003, 368; Behn 2014). Broader

societal outcomes have largely been missing from the debate. Andrews, Boyne,

Moon, and Walker (2010, 107) even argue that there has generally been a lack

of empirical studies on public sector performance that focus on “wider

organizational outcomes associated with the delivery of services.”

Here, public value adds a further perspective, since it questions whether

an individual values a public administration’s contribution to a community and

society beyond what this means in terms of his or her immediate personal gain.

Accordingly, public value is a resource for the individual and stems from the

awareness of being part of a social collective, which public administrations also

express. As social beings, humans need to be part of a functioning social

collective to live prosperous and satisfied lives. As an embodiment of the

collective’s will to achieve joint objectives, public administration shapes

individuals’ experiences with the collective. Psychology has identified four

basic needs that serve as a frame of reference to evaluate this experience.

Meynhardt (2009; 2015) has translated these basic needs into four public value

dimensions, as summarized in table 1:


163

TABLE 1

Relationship between Basic Needs and Basic Value Dimensions

Basic need for … Translation into a motivation for …

(examples)

Basic value

dimension

positive self-

evaluation

positive self-concept and self-worth

consistent relationship between self and

environment

feeling of high self-esteem (in social

comparison)

Moral-

ethical

maximizing

pleasure and

avoiding pain

positive emotions and avoidance of

negative feelings

flow experience

experience of self-efficacy due to action

Hedonistic-

aesthetical

gaining control

and coherence

over one’s

conceptual system

understanding and controlling one’s

environment

predictability of cause and effect

relationships

ability to control expectations to cause

desired outcomes

Utilitarian-

instrumental

positive

relationships

relatedness and belongingness

attachment, group identity

optimal balance between intimacy and

distance

Political-

social

Note: adapted from Meynhardt 2009, 203


164

This dimensionality, as well as the existence of a second-order factor,

namely public value, has been empirically corroborated (Meynhardt and

Bartholomes 2011). Besides the theoretical considerations that have already

been outlined, this empirical support increases our confidence in choosing

Meynhardt’s public value approach for our empirical enquiry into the

relationship between public sector performance and individuals’ life

satisfaction. In addition, Meynhardt’s four-dimensional public value construct

has been proposed as a performance measure for corporate entrepreneurship

strategies in the public sector (Kearney and Meynhardt, forthcoming).

Public Administration and Well-being

A core tenet of public value theory is that public administration and its

managers create value for individuals in society (Meynhardt 2009; Moore

2014). If individuals find this value important and appreciate it, we can expect it

to influence individuals’ well-being and happiness. Hollar (2003) points to

efforts in the 1970s to develop a holistic perspective on quality-of-life

measurement to be used for evaluation work in public administration. He notes

that this perspective disappeared in the 1980s but has recently made a comeback

in different fields, including economics, development studies, and business.

However, public administration literature has not put quality-of-life questions

back on the agenda, and as a result, there is a conspicuous research gap in terms

of the relationship between public sector performance and people’s happiness.

However, the happiness discourse in economics proves to be somewhat

more useful. As outlined above, Frey and Stutzer (2002) identify two

institutional factors, namely political decentralization and the political

participation possibilities available to people, that crucially affect subjective

well-being. Both are structural features of a (democratic) political system and

are not directly linked to public sector performance in terms of creating value

for the public. However, drawing on the work by Veenhoven (1993), who

undertook comparative research on happiness across 56 nations, Frey and


165

Stutzer (2002) point out that in Europe there is a high correlation between

(dis)trust in government and average happiness. On a larger scale, however,

when developing countries are included, this relationship is not empirically

significant. Frey and Stutzer (2002) explain this finding by pointing to the

prevalence of authoritarian governments in the developing world. People in

these countries have no say in the political process and have low expectations

concerning the work of public institutions. Consequently, they tend not to relate

their life satisfaction and happiness to the public realm. Conversely, citizens of

European democracies expect governments and public managers to fulfill their

needs and act in their interests. Once they feel that they can no longer trust the

government, however, their life satisfaction shrinks.

Above, we have outlined that the public value creation concept (Moore

1995; Meynhardt 2009; Meynhardt and Bartholomes 2011) offers very different

perspectives for assessing public sector organizations’ performance. However,

certain parallels do exist, as both concepts – public value and trust – focus on

individuals’ subjective evaluations of public sector performance. Since both

approaches share this view, examining the relationship between public

administrations’ public value performance and happiness should be a

worthwhile endeavor.

At this point, we should also note that our study views public

administration as a special kind of institution. We are fully aware that the term

‘institution’ is also used far more broadly to encompass not only organizational

entities but also formal rule sets (North 1990), taken-for-granted assumptions

(Meyer and Rowan 1991), less formal shared interaction sequences (Jepperson

1991), and ex ante agreements (Bonchek and Shepsle 1996). According to

DiMaggio and Powell (1991), institutions – regardless of their formal or

informal shape – are value-laden and define what is legitimate in a certain

context. In this context, we follow Selznick’s (1984, 17) famous dictum that “‘to

institutionalize’ is to infuse with value beyond the technical requirements at

hand.” From a public value viewpoint, this value infusion is part of public value


166

creation, since institutions produce and reproduce values in society.

Nevertheless, our study focuses solely on public administrations as

organizational entities.

THEORETICAL MODEL

The literature review has provided a brief overview of the happiness

research program in economics and points to the still underresearched role of

institutions. We introduced Meynhardt’s public value concept and presented it

as a way of substantiating public sector performance by relating it to

individuals’ experience of the social collective. Furthermore, we uncovered a

more general research gap with regard to the relationship between public

administration performance and societal well-being. In this present section, we

will strive to connect these dots and theoretically derive hypotheses to be

empirically tested.

We assume that public administrations are not value-free (quasi-

mechanistic) providers of public goods and services. On the contrary, we see

them as value-infused institutions (Selznick 1984) that embody society’s will to

achieve joint purposes (Moore 2014). Clearly, these joint purposes include

instrumental tasks, where performance can be adequately measured and

managed in terms of task fulfillment (Behn 2014). However, owing to the value-

laden nature of public administration as a symbol of the collective will, a more

comprehensive notion of performance is appropriate. Meynhardt’s public value

approach gives an important role to the assessment of task fulfillment but

complements it with a moral, political, and hedonic perspective. In this view, it

is public administration that connects the individual to the social collective, and

it is public value that measures its performance in terms of how well it does.

From this role of public administration as a “mediator” of the collective

experience flows our central theoretical argument that public value has a


167

positive influence on individual life satisfaction (happiness). In the end, public

value measures how positively an individual perceives the impact of the public

sector (as a whole or of particular organizations) on his or her experience of the

social collective. Humans are social beings in need of a functioning social

collective to prosper and live satisfied, happy lives. Public value creation entails

a strengthening of the social collective that serves as a resource for the

individual and will therefore increase its self-reported happiness. Thus, we

assume a direct relationship between the public value of a public administration

and people’s happiness, and we formulate our first hypothesis as follows:

Hypothesis 1: The public value of the public

administration is positively related

to self-reported happiness.

We continue by investigating whether the model that includes the

public value variable (defined as the public value model) fits the data better than

the standard happiness model (defined as the standard model), which mainly

emphasizes the socio-demographic and economic factors of happiness. Our

second hypothesis is therefore:

Hypothesis 2: The public value model fits self-

reported happiness better than the

standard happiness model does.

Lastly, we assume that the positive relationship between public value

and happiness is even stronger for individuals who work in public

administration. Research under the heading of public service motivation has

shown that individuals who choose to work in the public sector do so (partly)

out of a motivation to serve the public interest and to do something good for

society (Rainey and Steinbauer 1999; Perry and Hondeghem 2008; Homberg,

McCarthy, and Tabvuma 2015). This motivation distinguishes public sector

employees from their private sector counterparts (Perry 2000). We can

hypothesize that individuals who work in the public sector link their happiness


168

more strongly to the public sector’s contribution to the common good (i.e.

public value). When such individuals make public value evaluations, they also

indirectly evaluate themselves and their work. For them, public value

evaluations are linked to their own self-concept and identity, since they see

themselves as guardians of the common good. Furthermore, quite obviously, the

public sector – being a workplace as well as a service provider – plays a much

bigger role in public administration employees’ lives than in the lives of people

working in other industries and sectors. Thus, it is an even more important

shaper of the collective experience from which value is drawn. This value

contributes to individual happiness. Accordingly, we formulate our third

hypothesis as follows:

Hypothesis 3: The relationship between the public

value of public administration and

self-reported happiness is stronger

for individuals employed in public

administration than for individuals

who are not employed in public

administration.


169

METHODS

Data Collection

Our empirical work is based on data collected by intervista, a market

research institute with its own panel of Swiss citizens, during the spring of 2014.

Data was collected from a sample of the Swiss population – 4,483 subjects from

the German-speaking cantons – by means of an online survey. The sample was

representative of the German-speaking Swiss population in terms of sex, age,

level of education, and region of residence. The participants for the survey were

asked to evaluate the public value of major Swiss organizations and sectors.

Owing to the number of organizations in our study, not all of the subjects were

asked to evaluate the same selection of organizations. In this study, we consider

only those 870 randomly selected respondents who evaluated public

administration.

The public value of the Swiss public administration sector is our major

explanatory variable. Validated measures from earlier studies were used to

assess public administration’s public value (Meynhardt and Bartholomes 2011).

Following the recommendations of Wanous, Reichers, and Hudy (1997), as well

as those of Nagy (2002), we used single-item measures for each public value

dimension. In the marketing context, Bergkvist and Rossiter (2007) show that

single-item measures have the same predictive validity as multiple-item

measures when a doubly concrete construct (concrete singular object and

concrete attribute) is measured. Our items fit these criteria, as the respondents

were asked to evaluate a concrete object, namely the Swiss public

administration sector, along clearly defined dimensions by stating whether they

agreed with specific statements on a Likert scale from 1 (full disagreement) to 6

(full agreement). In Table 2, we report the items that we used to measure public

value.


170

TABLE 2

Items for Measuring Public Value

Dimension Item

Public Administration …

Moral-ethical …behaves in a decent manner.

Hedonistic-aesthetical …contributes to the quality of life in Switzerland.

Utilitarian-instrumental …does good work in its core business.

Political-social …contributes to social cohesion in Switzerland.

Loo (2002) points out that single-item measures can be used for short

and homogenous scales where unidimensionality is established by means of

factor analysis. The items we used to measure the four public value dimensions

have been shown to be anchor items for the relevant dimensions in a factor

analysis (Meynhardt and Bartholomes 2011). Although our approach to

measuring the four public value dimensions relies on single-item measures, we

aggregated these measures to obtain a respondent’s overall public value

perception. This approach fits the public value construct’s multidimensionality.

One quantitative (n=60) and one qualitative pretest showed that the questions

were well understood and that the public value appears to correspond to how

people evaluate organizations.

Importantly, when we considered the “public value of public

administration” sector variable, we relied on people’s individual evaluations.

According to our understanding of the concept, public value emerges from

individuals’ mental image of community and society (Meynhardt 2009) and

should therefore be measured at the individual level. Hence, we consider public

value to be a public administration performance indicator measured at the


171

individual level. As can be seen in Table 3, the Swiss public administration is

evaluated as having an average public value of 4.35, which suggests that the

respondents are relatively satisfied with it. The utilitarian-instrumental

dimension is evaluated most positively (4.45), while the moral-ethical

dimension shows the lowest score (4.25). Table 3 indicates that only

approximately 20% of the respondents chose disagreement categories (1–3) for

each dimension.

TABLE 3

Means and Distribution of Public Administration’s Public Value

Evaluation

Mo

ral-

eth

ical

Po

liti

cal-

soci

al

Uti

lita

rian

-

inst

rum

enta

l

Hed

on

isti

c-

aest

het

ical

Pu

bli

c V

alu

e

N

Public Administration 4.25 4.36 4.45 4.37 4.35 870

Percent Distribution

1 – full disagreement 2.18 2.76 1.38 1.72

2 6.67 5.98 5.86 5.17

3 16.21 14.37 14.02 16.78

4 27.24 25.17 23.45 24.60

5 34.25 33.10 35.98 34.48

6 – full agreement 13.45 18.62 19.31 17.24

Note: Public value = (moral-ethical + political-social + utilitarian-instrumental +

hedonistic-aesthetical) / 4


172

Self-reported happiness as the dependent variable is based on the

following single-item measure (Wanous et al. 1997; Nagy 2002; Bergkvist and

Rossiter 2007): “How satisfied are you in general with your life?” (Helliwell et

al. 2013). The respondents were asked to evaluate this question by using a six-

point Likert scale ranging between two extreme values (“completely dissatisfied

– 1” and “completely satisfied – 6”). Figure 1 shows that, with an average of 4.7

out of six points, the sample population of Swiss respondents has a very high

level of self-reported happiness. Some 16% of respondents perceive themselves

as completely satisfied (6), 54% report a 5, and 18% a 4, while only 1% are

completely dissatisfied (1); 3% and 7% of the respondents chose options

number 2 and 3, respectively.

FIGURE 1

Distribution of Happiness


173

In our first model, we regress the indices of individual happiness only

on the socio-demographic and the economic variables. The socio-demographic

variables comprise age, gender, degree of formal education, marital status, and

individual employment status. We include the individual’s gross income as the

only economic variable in the model. The age variable comprises seven groups.

The participants who answered the questions relating to the public

administration sector ranged in age from 19 to 85 years, with an average age of

50.5 years (SD=15.1). Six age groups are explicitly accounted for and range

from “29 years and younger” to “80 years and older,” while the constant term

includes the reference group “29 years and younger.” We use “female” as a

dummy for gender (female=1, men=0). In our sample, 41% of the respondents

were female, and 59% were male. We use the following classification for the

degree of formal education: “low education” (5.63%), “middle education”

(61.03%), and “high education” (33.33%). The reference group comprises

people with a low education. Marital status includes the following six groups:

“unmarried” (reference group), “concubinage,” “married/with partner,”

“married but living alone,” “divorced,” and “widowed.” Most of the individuals

in our sample (55%) are married, or live in a registered relationship. The

individual employment status variable comprises seven groups: “employed

(non-executive)” (reference group), “employed (executive),” “self-employed,”

“student,” “housewife,” “retired,” and “unemployed.” The economic variable

“income” has six groups, ranging from a gross income (per month) of “less than

3,000 CHF,” which is the reference group, to “more than 12,000 CHF.” Most

people (31.26%) in our sample earn an average gross income of between 6,001

and 9,000 CHF. Table 4 shows the descriptive statistics and correlations of all

the variables.


174

TABLE 4

Descriptive Statistics and Correlations

Variable Mean SD Min Max 1 2 3 4 5 6

1. Happiness 4.71 0.99 1 6 1

2. Age 2.61 1.51 1 6 0.23* 1

3. Sex

(female=1) 0.41 0.49 0 1 0.09* -0.23* 1

4. Education 3.86 1.23 1 6 0.08* -0.03 -0.07* 1

5. Gross

income 4.04 1.28 1 6 0.10* -0.02 -0.11* 0.26* 1

6. PV public

administration 4.36 1.08 1 6 0.28* 0.14* 0.05 0.07* 0.04 1

Notes: * Correlations are significant on a 5% level; N = 870.

Data Analysis

For the purpose of our data analysis, we calculate the public value of

Swiss public administration as the mean of the four public value dimensions:

moral-ethical, political-social, utilitarian-instrumental, and hedonistic-

aesthetical.2 Owing to the ordinal dependent variable, we use an ordered logit

approach to determine the effect of public administration’s public value on

happiness. Following hierarchical regression logic, we analyze the effects of

socio-demographic and economic factors on happiness in the first model. In the

second model, we add “public value of public administration” as an explanatory

variable. Using likelihood ratio testing to compare the two models’ levels of

goodness of fit with each other, we analyze whether the public value model fits

2 We used STATA version 11 to do the analyses.


175

the data better than the standard happiness model does. Finally, we determine

the effect of the interaction term of being an employee in public administration

(coded as 1; otherwise coded as 0) and public administration’s public value on

self-reported happiness. Out of the sample’s 870 individuals who evaluated the

public administration sector, 87 are employed in the Swiss public

administration.

ANALYSIS AND FINDINGS

Socio-Demographic and Economic Factors of Happiness

The results of the standard model confirm that socio-demographic

factors influence happiness. We find that older people are happier than young

people. Swiss people aged 60–69 years and 70–79 years report significantly

higher levels of well-being than the reference group (29 years and younger).

This result is consistent with predictions in the literature. In line with previous

research results (Wood, Rhodes, and Whelan 1989; Welzel 2013), we also find a

higher level of self-reported happiness for women than for men. Both gender

coefficients are highly significant at a 1% level. However, we have not found

any evidence that there is a positive correlation between happiness and the level

of education. We also find that unemployed people are unhappier than

employed people. Both coefficients are highly significant at a 1% level. The

happiness mean presented in table 5 shows that unemployed people living in

Switzerland are much less satisfied than employed people, students, retired

persons, and housewives. Moreover, housewives show significantly lower well-

being than employed people. As has also been found in a large number of other

studies (Gove, Hughes, and Style 1983; Diener et al. 1999), the influence that

being married has on happiness is positive and highly significant. Married

individuals, or people with a partner, show higher self-reported happiness than

do unmarried people, married people who live alone, people living in


176

concubinage, or divorced persons in our sample. Likewise, other stable

relationship categories have a significant, positive effect on well-being, even

when controlling for the influence of variables such as age, education,

profession, and income. It is interesting to note, however, that widowed

individuals report greater subjective well-being than unmarried individuals.

Higher gross income correlates positively with higher happiness. Nevertheless,

the difference in happiness is rather small, which is why we did not find a

significant effect.


177

TABLE 5

Ordered Logit Regression Results

Happiness Statistics

Mean

(1)

Standard Model

(2)

Public Value Model

(3)

Interaction Model

Coeffi-cients

z- statistics

Coeffi-cients

z- statistics

Coeffi-cients

z- statistics

Age 29 and younger 4.46 Reference Group Reference Group Reference Group

Age 30-39 4.52 0.146 (0.49) 0.122 (0.41) 0.123 (0.41) Age 40-49 4.51 0.020 (0.07) -0.011 (-0.04) -0.015 (-0.05)

Age 50-59 4.63 0.138 (0.47) 0.101 (0.34) 0.108 (0.37)

Age 60-69 5.03 0.781** (2.26) 0.760** (2.21) 0.777** (2.25) Age 70-79 5.17 1.037** (2.31) 1.094** (2.44) 1.132** (2.51)

Age 80 and older 5.00 0.288 (0.35) 0.140 (0.17) 0.215 (0.26)

Male 4.64 Reference Group Reference Group Reference Group Female 4.82 0.760*** (5.05) 0.658*** (4.32) 0.672*** (4.40)

Low education 4.73 Reference Group Reference Group Reference Group

Middle education 4.63 -0.532* (-1.69) -0.453 (-1.41) -0.455 (-1.41) High education 4.86 -0.287 (-0.86) -0.248 (-0.73) -0.254 (-0.74)

Unmarried 4.35 Reference Group Reference Group Reference Group

Concubinage 4.75 0.532** (2.04) 0.589** (2.23) 0.597** (2.25) Married/with partner 4.88 0.798*** (3.78) 0.788*** (3.72) 0.784*** (3.68)

Married but living alone 4.38 0.127 (0.28) -0.060 (-0.13) -0.001 (-0.00)

Divorced 4.47 0.105 (0.36) 0.0464 (0.16) 0.038 (0.13) Widowed 5.05 0.890* (1.80) 0.935* (1.88) 0.956* (1.91)

Employed (non-Executive) 4.59 Reference Group Reference Group Reference Group

Employed (executive) 4.70 0.190 (1.02) 0.111 (0.59) 0.106 (0.56) Self-employed 4.86 0.417 (1.46) 0.573** (1.99) 0.594** (2.06)

Student 4.66 0.651 (1.53) 0.567 (1.34) 0.601 (1.41)

Housewife 4.47 -0.806*** (-2.70) -0.766** (-2.54) -0.751** (-2.48) Retired 5.09 0.585** (2.07) 0.373 (1.32) 0.366 (1.30)

Unemployed 2.95 -2.549*** (-5.50) -2.300*** (-4.86) -2.301*** (-4.85)

Gross income < 3,000 CHF 4.48 Reference Group Reference Group Reference Group 3,000 - 4,500 CHF 4.47 -0.386 (-0.86) -0.376 (-0.84) -0.418 (-0.93)

4,501- 6,000 CHF 4.68 0.004 (0.01) -0.017 (-0.04) -0.050 (-0.11) 6,001- 9,000 CHF 4.71 -0.035 (-0.08) -0.091 (-0.22) -0.142 (-0.34)

9,001- 12,000 CHF 4.80 0.294 (0.69) 0.229 (0.54) 0.177 (0.42)

more than 12,000 CHF 4.83 0.340 (0.77) 0.253 (0.57) 0.206 (0.46) PV of Public Admin. - - - 0.430*** (6.65) 0.389*** (5.79)

PA Employee 4.95 - - - - -2.254 (-1.59)

PV of Public Admin. x PA Employee

- - - - - 0.508* (1.81)

McFadden R2 0.080 0.100 0.102

LR Chi2 176.6*** 221.7*** 226.4***

∆LR Chi2 for step 2 45.14*** Observations 870 870 870 870

Notes: DV: Happiness (six-point scale). PV=Public value; PA=Public administration; *

p<0.10, ** p<0.05, *** p<0.01. Source: Public Value Atlas Switzerland (2014).


178

The Effect of Public Administration’s Public Value on Happiness

Table 5 also shows the results of the institutional variable of public

administration’s public value. Swiss public administration’s public value has a

highly significant, positive effect on happiness, which suggests that a value-

creating public sector increases the likelihood of reporting higher happiness. We

also ran the regression analysis with all four public value dimensions separately,

and this analysis yielded similar results (not reported). All coefficients were

positive and significant at a 1% level. The estimated positive effect is strong,

and the z-statistics is comparable to others reported in the table. This result is

consistent with our first hypothesis that a higher public value of public

administration increases self-reported subjective well-being. Hence, hypothesis

1 is confirmed.

The public value variable increases the goodness-of-fit measure in the

second model. McFadden’s pseudo R2 increases from 0.08 to 0.10. The results

of the likelihood ratio test indicate that the public value model fits the data

significantly better than the standard happiness model (LR chi2 change of 45.14,

p<0.001). Thus, hypothesis 2 is confirmed.

Furthermore, we find evidence that the relationship between the public

value of public administration and self-reported happiness is stronger for

individuals employed in public administration than for individuals who are not

employed in public administration. However, this moderation effect is

significant only at a 10% level. Hence, hypothesis 3 is rejected.


179

DISCUSSION

Limitations

Despite the strength of our findings, our analysis inevitably has some

limitations. Since happiness and the public value of the Swiss public

administration are measured in the same survey, common method bias might

influence the results of our statistical analysis (Podsakoff, MacKenzie, Lee, and

Podsakoff 2003). We attempted to mitigate common method bias by employing

several procedural techniques (Podsakoff et al. 2003) and a survey design that

minimizes it (Jakobsen and Jensen 2015). To this end, we first avoided socially

desirable behavior and reduced the respondents’ evaluation apprehension by

guaranteeing them full anonymity and informing them that there were no right

or wrong answers to any of the questions. Moreover, we explicitly requested

honest personal evaluations. Second, to minimize any ordering effect (context-

induced mood, priming, etc.), we rotated the items at random. Third, we used

proven measures (Meynhardt and Bartholomes 2011) that earlier studies had

tested in qualitative and quantitative settings. Fourth, we used different scales to

measure our independent and dependent variables (see the description of data

collection procedures above).

We find that people who evaluate public administration more positively

are more likely to report higher happiness. This correlation does not, however,

establish causality, as happier people may, for example, simply regard their

institutions more benevolently. Along these lines, we also point to the

conceptual similarities and differences between public value and happiness.

Both concepts focus on individual subjective evaluations. Yet, the object of

evaluation is different: Public value is about how individuals perceive the public

sector’s contribution to a functioning social collective, whereas happiness (as

conceptualized here) entails an overall evaluation of one’s life. Our replication

of the standard happiness model with the subsequent insertion of public value as


180

an additional variable (hypothesis 2) shows that there are many other factors

that influence happiness. Nonetheless, public value can help us understand a

little better why some people are happier than others.

Implications for Public Administration Performance

Our central insight that people who assign a higher public value to

public administration tend to be happier has important implications for public

management research, especially regarding performance measurement. Public

management research tends to distinguish between objective and subjective

performance measures.

On the one hand, objective performance measures focus on the

measurement of specific public agency outputs, which these agencies mostly

generate themselves (Dalehite 2008; Schachter 2009; Behn 2014). New public

management proponents embrace such measures, as there is an assumption that

the latter allow for public sector management to be based on objective

assessments, to detach public management from the political process, and

thereby allow efficiency gains. According to Osborne and Gaebler (1992 cited

in Schachter 2010, 552), “politics focuses on perceptions and ideology, not

performance.”

On the other hand, subjective performance measures are derived from

surveys of a particular service’s clients, or of a sample of the general population

(Dalehite 2008; Schachter 2009), with respect to their satisfaction with public

agencies’ performance. Brodsky (2014) essentially sees the public value debate

as an attempt to shift from objective to subjective measures of government

performance.

Our finding that public value – a subjective measure of government

performance – has a significant influence on people’s happiness can be viewed

as an argument in favor of subjective measures of public sector performance. If

public agencies concentrate their efforts on the creation of public value, and


181

even engage in public value entrepreneurship (Meynhardt and Diefenbach 2012;

Kearney and Meynhardt, forthcoming), they can contribute to the subjective

well-being of people in the communities they serve. Contributing to the

happiness of the citizenry seems to be a very attractive value proposition for

public agencies. Yet, we should keep in mind that, by law, the public sector

performs certain functions – such as policing and tax collection – that involve

state authority and are necessary regardless of the current public value

appreciation.

Further research might examine whether the relationship between

public sector performance and citizens’ happiness also holds when objective

performance measures are used. As such research cannot just be carried out by

means of analysis at the individual level, as in the present study, it could adopt a

multilevel perspective (Hitt, Beamish, Jackson, and Mathieu 2007) that would

allow more differentiated research on the impact and importance of different

levels of public administration (local, state, national).

When comparing the debate on the measurement of well-being with

that on public sector performance, it is striking that both discussions revolve

around a subjective-objective divide. The gap that we have identified above

pertains to the general relationship between public sector performance and

citizens’ well-being. In this sense, one might argue that whether a subjective or

an objective approach is taken to measure the independent and dependent

variables is merely a matter of operationalization. However, we have indicated

above that the use of objective or subjective indicators is in fact based on very

different philosophical ideas about what constitutes “the good life” (Brock

1993). A systematic enquiry into the relationship between public sector

performance and well-being therefore requires an analysis of the relationship

between objective public sector performance and subjective well-being.

Moreover, it seems worth exploring how both objective and subjective public

sector performance can explain well-being. Our research into the relationship

between public value and happiness can thus be seen as a starting point for


182

future conceptual and empirical research on the relationship between public

sector performance and well-being

Further research might analyze whether the relationship we discovered

is also found in other countries, especially in a non-European context. Such

research is especially relevant given that the relationship between trust in a

government and happiness might be limited to Europe (Veenhoven 1993; Frey

and Stutzer 2002). It should be interesting to see whether a different pattern

emerges when we take a public value perspective on public sector performance.

Public Value, Public Values and Public Service Motivation

Despite rejecting the third hypothesis, we found preliminary evidence

that working in the public sector moderates the relationship between public

value of public administration and self-reported happiness. This finding points

to an adjacent research stream: public values. Moore (1995) conceptualizes

public value as an outcome dimension of public sector activity that can be seen

as a subjective but substantive measure of government performance (Meynhardt

and Bartholomes 2011; Brodsky 2014; Van Dooren et al. 2015), but the plural

‘public values’ have been defined as “those providing normative consensus

about (a) the rights, benefits, and prerogatives to which citizens should (and

should not) be entitled; (b) the obligations of citizens to society, the state, and

one another; and (c) the principles on which governments and policies should be

based” (Bozeman 2007, 13). In other words, public values deal with the

normative principles guiding governmental action and therefore give direction

to public sector employees’ behavior (Andersen et al. 2013; Bozeman and Su

2015).

While developing the third hypothesis, we drew on public service

motivation literature, which (among other things) shows that public sector

employees are motivated by serving the public and making a contribution to the

common good (Perry and Vandenabeele 2015). Andersen et al. (2013) carve out


183

commonalities and differences between the public service motivation and public

values literatures. They find that the literatures clearly overlap, mainly because

values have a strong normative appeal that translates into a norm-based driver of

motivation. One could also argue that public values represent intentions driving

(part of) the public service motivation, which in turn enables public managers to

create public value. One implication of our research is that the intention and the

perceived actual public value performance interact to have a strong influence on

individuals’ life satisfaction (happiness). There has been some research on the

relationship between public service motivation and public values (Andersen et

al. 2013). Both public value and public values have been identified as two

components of an emerging paradigm in public management (Bryson et al.

2014). However, our findings suggest that the relationship between the

constructs is quite complex and warrants further (conceptual and empirical)

enquiry. In terms of empirical research, we point to the need for studies with

bigger samples (our subsample of public administration employees comprised

only 87 subjects) that could show the effect we found at a higher level of

significance.

CONCLUSION

Public administrations matter in people’s lives. In this study, we

demonstrated the impact of public administrations’ public value on individual

happiness. Future happiness research must not ignore this effect, since it extends

existing models that explain the drivers behind happiness. Research on public

administrations may benefit from a public value perspective, which captures

broader societal outcomes that are otherwise not considered from a performance

perspective. This approach would do justice to the value-infused nature of

institutions. In other words, our study helps to reclaim public administration as a

positive force for society at large.


184

REFERENCES

Alford, J., and O’Flynn, J. 2009. Making Sense of Public Value: Concepts,

Critique and Emergent Meanings. International Journal of Public

Administration 32: 171–91.

Andersen, L. B., Jørgensen, T. B., Kjeldsen, A.B., Pedersen, L. H., and

Vrangbæk, K. 2012. Public Values and Public Service Motivation:

Conceptual and Empirical Relationships. American Review of Public


Andrews, R., Boyne, G. A., and Walker, R. M. 2006. Subjective and Objective

Measures of Organizational Performance: An Empirical Exploration. In G.

A. Boyne, K. J. Meier, L. J. O’Toole Jr., and R. M. Walker, eds., Public

Services Performance: Perspectives on Measurement and Management.

Cambridge, UK: Cambridge University Press: 14–34.

Arrosa, M. A., and Gandelman, N. 2015. Happiness Decomposition: Female

Optimism. Journal of Happiness Studies, First online: 1–26.

Behn, R. 2014. The PerformanceStat Potential. A Leadership Strategy for

Producing Results. Washington: Brookings Institution Press.

Berry, A. 2011. Institutions, organizations and wellbeing. In J. Athertin, E.

Graham, and I. Steedman (eds.). The practices of happiness: Political

economy, religion and wellbeing: 134-147. Oxon: Routledge.

Bergkvist, L., and Rossiter, J. R. 2007. The Predictive Validity of Multiple-Item

versus Single-Item Measures of the Same Constructs. Journal of Marketing

Research, 44(2): 175-184.

Bonchek, M. S., and Shepsle, K. A. 1996. Analyzing politics: Rationality,

behavior and institutions. New York: W.W. Norton and Co.


185

Boyne, G. A. 2002. Concepts and Indicators of Local Authority Performance:

An Evaluation of the Statutory Frameworks in England and Wales. Public

Money and Management, 22(2): 17–24.

Boyne, G. A. 2003. Sources of Public Service Improvement: A Critical Review

and Research Agenda. Journal of Public Administration Research and

Theory, 13(3): 367–394.

Bozeman, B. 2007. Public Values and Public Interest: Counterbalancing

Economic Individualism. Washington, DC: Georgetown University Press.

Bozeman, B. 2015. Public Service Motivation Concepts and Theory: A Critique.

Public Administration Review, 75(5): 700-710.

Braakmann, N. 2014. The consequences of own and spousal disability on labor

market outcomes and subjective well-being: evidence from Germany.

Review of Economics of the Household, 12(4): 717–736.

Brock, D. 1993. Quality of life measures in health care and medical ethics. In

M. C. Nussbaum and A. Sen (Eds.), The quality of life: 95–132. Oxford:

Clarendon Press.

Brodsky, R. L. “Public value” and the measurement of government

performance: The shift to subjective metrics. Public Administration Review,

74(4): 478–479.

Bryson, J. M., Crosby, B. C., and L. Bloomberg. (2014). Public Value

Governance: Moving beyond Traditional Public Administration and the New

Public Management, Public Administration Review, 74 (4): 445–456.

Clark, A. E., and Oswald, A. J. 1994. Unhappiness and Unemployment. The

Economic Journal, 104(424): 648–659.

Clark, A. E., Flèche, S., and Senik, C. 2015. Economic Growth Evens Out

Happiness: Evidence from Six Surveys. Review of Income and Wealth. First

online: 1–15.


186

Dalehite, E. G. 2008. Determinants of performance measurement: An

investigation into the decision to conduct citizen surveys. Public

Administration Review, 68(5): 891–907.

Diener, E. 2000. Subjective Well-Being. The Science of Happiness and a

Proposal for a National Index. American Psychologist, 55(1): 34–43.

Diener, E., and Suh, E. 1997. Measuring Quality of Life: Economic, Social, and

Subjective Indicators. Social Indicators Research, 40(1-2):189–216.

Diener, E., Suh, E. M., Lucas, R. E., and Smith, H. L. 1999. Subjective well-

being: Three decades of progress. Psychological Bulletin, 125(2): 276–302.

Diener, E., Tay, L., and Oishi, S. 2013. Rising income and the subjective well-

being of nations. Journal of Personality and Social Psychology, 104(2):

267–276

DiMaggio, P. J. and Powell, W. W. 1991. Introduction. In W.W. Powell and P.J.

DiMaggio (Eds.), The new institutionalism in organizational analysis:1–

38. Chicago: University of Chicago Press.

Di Tella, R., MacCulloch, R. J., and Oswald, A. J. 2001. Preferences over

Inflation and Unemployment: Evidence from Surveys of Happiness. The

American Economic Review, 91(1): 335–341.

Di Tella, R., MacCulloch, R. J., and Oswald, A. J. 2003. The Macroeconomics

of Happiness. The Review of Economics and Statistics, 85(4): 809–827.

Dolan, P., Peasgood, T., and White, M. 2008. Do we really know what makes us

happy? A review of the economic literature on the factors associated with

subjective well-being. Journal of Economic Psychology, 29(1): 94–122.

Dolan, P., and Powdthavee, N. 2012. Thinking about it: a note on attention and

well-being losses from unemployment. Applied Economics Letters, 19(4):

325–328.


187

Dorn, D., Fischer, Justina A. V., Kirchgässner, G., and Sousa-Poza, A. 2007. Is

It Culture or Democracy? The Impact of Democracy and Culture on

Happiness. Social Indicators Research, 82(3): 505–526.

Easterlin, R. A. 1995. Will raising the incomes of all increase the happiness of

all? Journal of Economic Behavior and Organization, 27(1): 35–47.

Ellison, C. G. 1991. Religious Involvement and Subjective Well-Being. Journal

of Health and Social Behavior, 32(1): 80–99.

Forgeard, M. J. C., Jayawickreme, E., Kern, M. L., and Seligman, M. E. P.

2011. Doing the right thing: Measuring wellbeing for public policy.

International Journal of Wellbeing, 1(1): 79–106.

Frank, R. H. 2010. Luxury fever: Weighing the cost of excess. Princeton, N.J.,

Woodstock: Princeton University Press.

Frey, B. S., and Stutzer, A. 2000a. Happiness, Economy and Institutions. The

Economic Journal, 110(446): 918–938.

Frey, B. S., and Stutzer, A. 2000b. Happiness Prospers in Democracy. Journal

of Happiness Studies, 1(1): 79–102.

Frey, B. S. and Stutzer, A. 2002. Happiness and economics: How the economy

and institutions affect well-being. Princeton, NJ: Princeton University

Press.

Gove, W. R., Hughes, M., and Style, C. B. 1983. Does Marriage Have Positive

Effects on the Psychological Well-Being of the Individual? Journal of

Health and Social Behavior, 24(2): 122–131.

Helliwell, J. F., Layard, R., and Sachs, J. 2013. World Happiness Report 2013.

New York: UN Sustainable Development Solutions Network.

Helliwell, J. F., and Huang, H. 2014. New measures of the costs of

unemployment: Evidence from the subjective well-being of 3.3 million

Americans. Economic Inquiry, 52(4): 1485–1502.


188

Helliwell, J. F., Huang, H., and Wand, S. 2014. Social Capital and Well-Being

in Times of Crisis. Journal of Happiness Studies, 15(1):145–162.

Hitt, M. A., Beamish, P. W., Jackson, S. E., and Mathieu, J. E. 2007. Building

theoretical and empirical bridges across levels: Multilevel research in

management. Academy of Management Journal, 50(6): 1385–1399.

Hollar, D. 2003. A holistic theoretical model for examining welfare reform:

Quality of life. Public Administration Review, 63(1): 90-104.

Homberg, F., McCarthy, D., and Tabvuma, V. 2015. A Meta-Analysis of the

Relationship between Public Service Motivation and Job Satisfaction. Public

Administration Review, 75(5): 711-722.

Inglehart, R., and Welzel, C. 2005. Modernization, cultural change, and

democracy: The human development sequence. Cambridge, UK, New

York: Cambridge University Press.

Inglehart, R., Foa, R., Peterson, C., and Welzel, C. 2008. Development,

Freedom, and Rising Happiness: A Global Perspective (1981–2007).

Perspectives on Psychological Science, 3(4): 264–285.

Jakobsen, M., and Jensen, R. 2015. Common Method Bias in Public

Management Studies. International Public Management Journal, 18(1): 3-

30.

Jepperson, R. 1991. Institutions, institutional effects, and institutionalism. In

W.W. Powell and P.J. DiMaggio (Eds.), The new institutionalism in

organizational analysis: 143-163. Chicago: University of Chicago Press.

Kearney, C. and Meynhardt, T. forthcoming. Directing Corporate

Entrepreneurship Strategy in the Public Sector to Public Value –

Antecedents, Components and Outcomes. Forthcoming article in

International Public Management Journal.


189

Lachman, M. E., and Weaver, S. L. 1998. The sense of control as a moderator of

social class differences in health and well-being. Journal of Personality and

Social Psychology, 74(3): 763–773.

Loo, R. 2002. A caveat on using single-item versus multiple-item scales.

Journal of Managerial Psychology, 17(1): 68-75.

Lu, L., Gilmour, R., and Kao, S.-F. 2001. Cultural Values and Happiness: An

East–West Dialogue. The Journal of Social Psychology, 141(4): 477–493.

Lü, W., Wang, Z., Liu, Y., and Zhang, H. 2014. Resilience as a mediator

between extraversion, neuroticism and happiness, PA and NA. Personality

and Individual Differences, 63: 128–133.

Lucas, R. E., Diener, E., Grob, A., Suh, E. M., and Shao, L. 2000. Cross-

Cultural Evidence for the Fundamental Features of Extraversion. Journal of

Personality and Social Psychology, 79(3): 452–468.

Meyer, J. W. and Rowan, B. 1991. Institutionalized Organizations: Formal

Structure as Myth and Ceremony. In W.W. Powell and P.J. DiMaggio

(Eds.), The new institutionalism in organizational analysis. Chicago:

University of Chicago Press: 41-82.

Meynhardt, T. 2009. Public Value Inside: What is Public Value Creation?.

International Journal of Public Administration, 32(3): 192–219.

Meynhardt, T. 2015. Public Value: Turning a Conceptual Framework into a

Scorecard. In: Bryson, J. M., Crosby, B. C., & Bloomberg, L. (eds.). Public

Value and Public Administration. Washington, DC: Georgetown University

Press: 147–169.

Meynhardt, T., and Bartholomes, S. 2011. (De)Composing Public Value: In

Search of Basic Dimensions and Common Ground. International Public



190

Meynhardt, T., and Diefenbach, F. 2012. What drives entrepreneurial

orientation in the public sector? Evidence from Germany’s federal labor

agency. Journal of Public Administration Research and Theory, 22(4):

761–792.

Mikucka, M. 2013. Does Individualistic Culture Lower the Well-Being of the

Unemployed? Evidence from Europe. Journal of Happiness Studies, 15(3):

673–691.

Moore, M. 1995. Creating Public Value – Strategic Management in

Government. Cambridge, MA: Harvard University Press.

Moore, M. 2014. Public value accounting: Establishing the philosophical basis.

Public Administration Review, 74(4): 465–477.

Musgrave, R. A. 1959. The Theory of Public Finance: A Study in Public

Economy. New York: McGraw Hill.

Nagy, M. S. 2002. Using a single-item approach to measure facet job

satisfaction. Journal of Occupational and Organizational Psychology,

75(1): 77–86.

North, D. C. 1990. Institutions, institutional change and economic

performance. New York: Cambridge University Press.

Pfeifer, C. 2013. Life satisfaction and the consumption values of partners and

friends: Empirical evidence from German panel survey data. Economics

Bulletin, 33(4): 3131–3142.

Podsakoff, P. M., MacKenzie, S. B., Lee, J.-Y., and Podsakoff, N. P. 2003.

Common Method Biases in Behavioral Research: A Critical Review of the

Literature and Recommended Remedies. Journal of Applied Psychology,

88(5): 879–903.

Oerlemans, W., and Bakker, A. 2014. Why extraverts are happier: A day

reconstruction study. Journal of Research in Personality, 50: 11–22.


191

Osborne, D., and Gaebler, T. 1992. Reinventing government: How the

entrepreneurial spirit is transforming the public sector. Reading, MA:

Addison-Wesley.

Perry, J. L. 2000. Bringing Society In: Toward a Theory of Public-Service

Motivation. Journal of Public Administration Research and Theory, 10(2):

471-488.

Perry, J. L., and Hondeghem, A. 2008. Building Theory and Empirical Evidence

about Public Service Motivation. International Public Management

Journal, 11(1): 3-12.

Perry, J. L., and Vandenabeele, W. 2015. Public Service Motivation Research:

Achievements, Challenges, and Future Directions. Public Administration

Review, 75(5): 692-699.

Rainey, H. G., and Steinbauer, P. 1999. Galloping Elephants: Developing

Elements of a Theory of Effective Government Organizations. Journal of

Public Administration Research and Theory, 9(1): 1-32.

Rainey, H. G. 2003. Understanding and Managing Public Organizations.

Hoboken, NJ: John Wiley and Sons.

Schachter, H. L. 2009. Towards a more democratic performance

measurement: A note on the terminology of objective and subjective

performance measures. Paper presented at American Political Science

Association Conference, Toronto.

Schachter, H, L. 2010. Objective and Subjective Performance Measures: A Note

on terminology. Administration and Society, 42(5): 550–567.

Seidlitz, L., and Diener, E. 1993. Memory for Positive versus Negative Life

Events: Theories for the Differences between Happy and Unhappy Persons.

Journal of Personality and Social Psychology, 64(4): 654–664.


192

Selznick, P. [1957]1984. Leadership in Administration. A Sociological

Interpretation. University of California Press: Berkeley and Los Angeles.

Senik, C. 2014. Wealth and happiness. Oxford Review of Economic Policy,

30(1): 92–108.

Stiglitz, J. E., Sen, A., and Fitoussi, J.-P. 2009. Report by the Commission on

the Measurement of Economic Performance and Social Progress. Paris:

Commission on the Measurement of Economic Performance and Social

Progress.

Stocks, A., April, K., and Lynton, N. 2012. Locus of control and subjective

well-being – a cross-cultural study. Problems and Perspectives in

Management, 10(1); 17–25.

Trueman, F., Cornelius, N., Franks, T., and Lawler, J. 2013. Regeneration and

well-being: research into practice. International Journal of Public Sector

Management, 26(3): 180–189.

Van Dooren, W., Bouckaert, G. and Halligan, J. 2015. Performance

Management in the Public Sector. London: Routledge.

Veenhoven, R. 1993. Happiness in nations: Subjective appreciation of life in

56 nations 1946-1992. Rotterdam: Erasmus University Press.

Waldo, D. 1948. The administrative state: A study of the political theory of

American public administration. New York: the Ronald Press Company.

Wanous, J. P., Reichers, A. E., Hudy, M. J. 1997. Overall job satisfaction: how

good are single-item measures? Journal of Applied Psychology, 82(2): 247–

252.

Welzel, C. 2013. Freedom rising: Human empowerment and the quest for

emancipation. Cambridge, UK: Cambridge University Press.

Welzel, C., and Inglehart, R. 2010. Agency, values, and well-being: A human

development model. Social Indicators Research, 97(1): 43–63.


193

Wood, W., Rhodes, N., and Whelan, M. 1989. Sex differences in positive well-

being: A consideration of emotional style and marital status. Psychological

Bulletin, 106(2): 249–264.

194

195

PAPER 4:

FC BAYERN MUNICH: CREATING PUBLIC VALUE

BETWEEN LOCAL EMBEDDEDNESS AND GLOBAL

GROWTH

Timo Meynhardt, Pepe Strathoff, Lorenz Beringer, & Sebastian Bernard

July 2015

Abstract

The case study describes how FC Bayern Munich – Germany’s most

successful football club – has dealt with the challenges of the club’s

international growth and role in society. We describe how the club management

handled the balancing act between its local rootedness in the German state of

Bavaria and its ambitions to be a global player in the football industry.

Specifically, we show how the management became aware of rising tensions,

how these were analyzed and mapped by means of the Public Value Scorecard®

tool and the measures taken to unite and balance the seemingly paradox goals of

strengthening the club’s Bavarian roots and achieving global growth.

Publication: The Case Centre teaching case (document no. 215-131-1)


196

INTRODUCTION

Arjen Robben’s unforgettable last-minute goal for FC Bayern Munich

earned it the 2013 UEFA Champions League final and a new pinnacle in its

extraordinarily successful history. At that moment, FC Bayern Munich was the

first professional male football team in Germany to win the triple crown, i.e. the

Champions League, the national Bundesliga, and the German knockout cup

DFB-Pokal.

As you know, football is more than a mere sports game. It takes place

in society with a multitude of expectations and full of diverse interests. A few

months before the said match, in January 2013, a meeting was scheduled to

begin in the meeting room of the club’s headquarter in Säbener Strasse in

Munich. The room looked out on the vast training pitches – now covered with

snow and deserted. The gloom outside contrasted sharply with the brightly lit

meeting room in which everything – from the coffee pots, to the carpet, and

even the door and window handles – is branded with the club logo. But the

atmosphere was tense, reflecting the tension of the only three persons in the

room: Andreas Jung, a member of the executive board responsible for the club

sponsoring, brand management, and merchandising; Stefan Mennerich, the

digital media director, and Lorenz Beringer, the social media head.i

The topic of their meeting was neither normal, nor easy. Various public

debates about the club’s stance towards the European Championship 2012,

which had been held in Poland and the Ukraine, the introduction of turnstiles in

parts of its Allianz Arena stadium, and a public debate about who was

responsible for the security costs in and around the stadium, had again

underlined the need to deal with ever-present societal and political issues. The

three managers found these “fuzzy” topics hard to grasp, as they were geared to

address clearly defined topics with clear alternatives and decisions to be made.

Their ordinary talk usually focuses upon the world of sports. At that moment,

Paper 4: FC Bayern Munich and Public Value

197

they all felt that an unknown animal called society was in the room and had to

be dealt with.

The men put down their coffee cups and got down to business. Their

discussion evolved and it quickly became clear that a coherent approach to the

raised problems had to go beyond issue management. The crux was that the

club’s identity and what it represents from the public’s viewpoint – its public

valueii – had to be thoroughly thrashed out. This was an especially important

task: The club was experiencing a period of rapid growth, was looking for new

fans all around the world, while simultaneously fostering its roots in the German

state of Bavaria.

Jung: “We need to describe and further sharpen our brand.

We really need to emphasize this – it is essential for

the future of FC Bayern Munich.”

Mennerich: “Yes, and this is not about creating something new.

Rather, we need to make explicit what we live

implicitly every day. While growing, we must not lose

sight of who we are, we must not lose our public

value. Our global growth will only be successful if it

is based on our values, on what we stand for.”

Beringer: “I have an idea! In the executive master program I

am currently following at the University of St.Gallen,

I heard about a new tool with which to assess public

value – the Public Value Scorecard. It is very

different from typical corporate social responsibility

or sustainability stuff. I could gather information on

the tool and if it is suitable, I’ll conduct a public

value assessment.”

Mennerich: “That is a very interesting idea. Go ahead and let us

know if you need help.”


198

This talk marked the kick-off of a process described in this teaching

case, which shows that the club took advantage of its broader impact by

systematically exploring its value for society. The case focusses on the 2012-

2014 period. In particular, the board wanted to assess this value by means of the

Public Value Scorecard® tool. After a short overview of the club’s history and

organizational setup, we provide a description of how the club became

increasingly aware of its societal role due to emerging tensions, as well as how

these tensions were mapped and analyzed. Finally, we illustrate how the

management team moved forward to not only explore, but also to exploit, the

club’s public value to increase the company value and tap new growth

potentials.

HISTORY AND PROFILE OF THE ORGANIZATION

FC Bayern Munich is Germany’s most popular and successful football

club. It has the largest supporter base and polarizes public opinion like no other

football club in the country. The club was founded in 1900 and was soon known

as an open-minded institution attracting members from different parts of

Germany and across all social classes. With its first German championship in

1932, it demonstrated its role as one of Germany’s best football clubs. As there

were many Jewish members, the club suffered substantially during Nazism and

war. In this darkest chapter of Germany’s history, the club was forced to expel

all Jewish members, including its then president, Kurt Landauer. Further, many

of its players and members lost their lives, leaving the club struggling for

existence. In the early post war years, the club was of little note. When the

Bundesliga (the first national football league in the western part of the then

divided Germany) was founded in 1963, the club was not selected to become

member of the first season.

However, Wilhelm Neudecker, who was the club president at the time,

and his coach, Zlatko Čajkovski, built up a new team with players such as Franz

Beckenbauer. With this strong team, Bayern Munich qualified for the


199

Bundesliga in 1965. The club won the German cup (DFB-Pokal) in 1966 and

1967 and from there onwards it seemed unstoppable. In 1969 it won the double

(the Bundesliga and the DFB-Pokal) for the first time. In the mid-1970s, it

actually won the European Champions Club’s Cup (predecessor of the UEFA

Champions League) three times consecutively (1974, 1975, and 1976). The

period from 1965-1976 is still regarded as the most successful period in the

club’s history, as it won 13 titles. FC Bayern Munich players also contributed

significantly to the German national team’s success in the 1972 European

Championship and the 1974 World Championship. These successful years

contributed to the increasing popularity of football in Germany and underscored

FC Bayern’s ambition to be counted among the world’s best football clubs.

In the following period, the team was restructured, but nevertheless

failed to win a title. This changed after a subsequent restructuring. Under the

leadership of its manager, Uli Hoeness, the club won the national league six

times in the 1980s. But there was a long haul ahead: The club only returned to

international fame when, under the watchful eye of its coach, Ottmar Hitzfeld, it

won the Champions League in 2001 and several national titles. However, by

winning the triple crown in 2013, FC Bayern Munich reached the pinnacle of

success in the 2012/2013 season.iii

In May 2013, FC Bayern’s company value was believed to be USD 860

million, making it the world’s most valuable football club.iv In recent years, the

club has developed its professionalization and marketing. In 2002 it spun off its

professional football team in an incorporated company, the FC Bayern Munich

AG. The club holds 75% of the company shares. The remaining shares are held

by the club’s longstanding partners Adidas, Allianz, and Audi (each 8.33%).v

Unlike many other clubs, FC Bayern is also known for its stable finances and

conservative financial policy, which is manifested in its legendary

“Festgeldkonto” (fixed-term deposit account). The club operates at a profit and

its management follows the principle of never spending more money on new

players and infrastructure development than it earns in revenue. The club’s


200

earnings comprise the following major categories: 39% come from match

operations, 24.8% from sponsoring and marketing, 17.3% from merchandising,

and 11.2% from the commercialization of media rights. Compared to other

major international clubs, this is a very balanced distribution, providing a stable

base for ongoing success.vi In terms of overall sales, FC Bayern is fourth in the

world, with annual sales of EUR 368.4 million in the 2011/2012 season.vii The

club employs about 600 people.

The club’s athletic and economic success is also reflected in its stable

and growing fan base. The Allianz Arena, its stadium, is always packed with

supporters and tickets for more than 200 consecutive matches are sold out long

before. Its public training sessions regularly attract more than 3000 supporters.

Its approximately 9 million supporters in Germany make FC Bayern Germany’s

most popular football club. Worldwide, there are more than 3000 fan clubs. A

dedicated department at its headquarters allows the club to focus on all of its

fans. Fan club activities include supporter representatives regularly consulting

with the club management and celebrities (coach, player, former players)

appearing at events that fan clubs host. A football match between a selection of

supporters and the professional football team is an annual highlight for the fan

clubs.

MORE THAN A FOOTBALL CLUB

Its recent extraordinary success has again underlined the club’s

outstanding role in German football. Bayern Munich’s success nurtures the

club’s growth in terms of supporters, finances, and public recognition. As a

football club, Bayern Munich plays an important role in the lives of a great

many people in Germany and abroad. Every weekend, its fans passionately

follow the team, identify with individual players, and attach meaning to the club

that goes well beyond a specific sport event. Conversely, its enormous success

attracts envy and rejection, while the club’s practice of purchasing the best


201

players of its competitors in the German national league has attracted criticism

and polarizes friends, families, and colleagues. Whatever the case, FC Bayern

Munich is an organization that enormously impacts people’s emotional state,

their perception of right or wrong, their social relationships, and ultimately their

images of society. For many fans, the daily life is heavily influenced by

activities to follow the club, either on TV, in fan club activities, or in the

stadium. Taken together, FC Bayern Munich contributes to the making of

society, since it creates a social context, which people relate to, and which they

experience as a source of satisfaction, energy, and even identity. In other words,

the club creates public value by shaping people’s attitudes and values about

their life and the society in which they live. The club’s recent success has again

strengthened this impact.

This societal role provides tremendous opportunities, but also poses

challenges for the club management. The management cannot merely focus on

being successful in football tournaments, but has to take the societal

implications of its actions into account. This involves balancing its stakeholders’

(e.g. sponsors, who aspire to a global reach, vs. local fans, who want direct

access) legitimate claims, choosing the right competitive strategy (purchasing

ready-made players on the international market vs. investing in the club’s young

players through talent development), and taking a stance on societal issues, such

as immigration and social inequality. Basically, the club increasingly finds itself

having to trade off its local embeddedness and global growth ambitions.

TENSIONS EMERGE

The European Championship 2012

The first sign of trouble ahead came in the run-up to the 2012 European

Championship to be held in Poland and the Ukraine. Comments appeared on FC

Bayern Munich’s Facebook wall asking the club to take a position on the


202

Ukraine’s problematic human rights situation. Calls were made to bar the club’s

players from participating in the tournament as part of their national teams and

to publicly condemn the government’s treatment of the opposition leader, Julia

Timoschenko. Some comments showed very explicitly that FC Bayern was seen

to have a responsibility to take a stand and that some people were very

disappointed:

“That is an insult for every football supporter that cares

about human rights issues.”

“How can the club just ignore this?”

“Shabby, shabby, FC Bayern!”viii

These statements showed that the club could no longer refrain from

taking a position on political and social issues. The club’s president, Uli

Hoeness, subsequently stated his view of the issue publicly:

“I very much hope that Michel Platini [the UEFA

president] will at the right moment express his opinion

clearly.”

“I trust that the players are wise enough to form an

opinion. I will respect any player who takes a public stand

on this issue.”ix

Hoeness’ statements showed that, in 2012, the club felt the need to

comment on the issue, but delegated the responsibility for this from the club as

an institution upwards to the European football association and downwards to

individual players. Nevertheless, the club’s top management commenting on the

issue was sufficient to show that it was aware of its role as a social institution

that influenced societal values. It could no longer refrain from societal and

political debates by using the excuse that it was “just a football club.”


203

Struggle on the Stands

But this was not the end of the public debate. The introduction of

turnstiles on the southern stands of the Allianz Arena led to a debate among its

fans. The southern stands, right behind the goal, are known as the area where

fans with the greatest propensity to kindle the well-known stadium atmosphere

gather. Here, football chants are started, which fans in other parts of the stadium

join. No wonder fans with tickets for seated terraces – often in other parts of the

stadium – frequently joined the fans with tickets for the standing terrace, which

is part of the southern stands, to help create the unique stadium atmosphere.

Together, their passion seemed to carry the team.

Nevertheless, the club management decided to limit access to the

southern stands by introducing turnstiles, which would only allow holders of

tickets for this specific area of the stadium access to the stalls. This led to an

outcry, especially from the club’s “ultra” fans, who are well-organized groups of

fans that regard themselves as a fan elite. “Schickeria,” one of FC Bayern’s

most famous “ultra” fan groups, issued the following statement:

“These turnstiles are a manifestation of the top

management’s wish to exert total control. For the club’s

leadership, they have the agreeable side effect of gagging

critical voices and expelling disagreeable fans, because

the electronic turnstiles make these stadium visitors totally

transparent. The turnstiles are destroying the fan culture

on the southern stands. Fan culture thrives through

spontaneity and freedom, and dies if totally controlled.”x

A Munich newspaper photograph caption read:

“Atmosphere killer turnstiles? This is what they look like

in action.”xi


204

However, the club clarified that the turnstiles were necessary for

security purposes and to comply with building regulations. The turnstiles would

prevent more fans from entering certain areas of the stadium than for which

these were originally designed. The fans, especially the ultra fan groups,

responded to the introduction of the turnstiles by boycotting some games, which

influenced stadium atmosphere, making it far less passionate. In the end, the

club agreed with a compromise: The number of people allowed into the stalls

would still be limited but allocated on a first come-first served basis on the day

of the match.xii

This issue demonstrated that while certain club decisions are based on a

business sense and on compliance with legal requirements, (part of) its fans may

consider them contrary to the club spirit. In this sense, FC Bayern Munich is a

unique organization due to its fans’ extreme emotional attachment and support

of the team. Consequently, any changes to the status quo lead to acute public

attention and emotional reactions.

TENSIONS ARE MAPPED AND ANALYZED

The calls to take a stand on the human rights situation in Ukraine and

the conflict regarding the turnstile introduction made the club’s leadership

aware that its enormous growth and success were not without growing pains,

and that it needed more information on its role in society. That was when

Lorenz Beringer, the club’s head of social media and customer relationship

management, had an epiphany. During an executive training course at the

University of St.Gallen in Switzerland, he had heard about a tool that helps

organizations understand what makes them valuable for society: the Public

Value Scorecard® (PVSC).xiii

Public value is a unique concept to explicitly analyze how an

organization contributes to the quality of relationships between an individual


205

and what is called “society”, i.e. collectively shared values, which constitute

social relations and help integrate individuals in a social system. Whereas the

notion of corporate social responsibility takes primarily moral-ethical

considerations into account, public value broadens the perspective to a number

of other collectively shared values. Thus, it calls for a holistic viewpoint by

relating “value” to the fulfillment of basic human needs, i.e. to instrumental-

utilitarian, moral-ethical, political-social, and hedonistic-aesthetical needs at the

same time. In effect, public value rejuvenates the idea of the common good as a

precondition for individual development and growth beyond specific values or

different stakeholder interests. While stakeholder approaches, for example,

focus on legitimate claims of particular groups, public value addresses a public

dimension, which touches upon the experience of society itself, on systemic

properties – or: common good. For example, a sense of belonging, cultural

traditions, or solidarity can be understood from a public value perspective much

more easily than from fragmented stakeholder perspectives.

In contrast to other management concepts, public value systematically

takes a societal viewpoint, since it presumes that individuals develop and grow

depending on the society they live in. More precisely, it is about the images

about societal values, which people construct and internalize. Along these lines,

organizations create value for society, which is often underestimated or not fully

analyzed. It is definitely not fully captured in an annual report or financial

statement.

For Lorenz Beringer, it was very obvious that the new language of

public value could help to better see how FC Bayern Munich shapes value in

and for society. He convinced and persuaded his colleagues that the information

provided by the PVSC would clearly support the club’s strategic decision

making in facing the challenges described. The board subsequently mandated

Beringer to use the PVSC to identify the club’s public value.


206

The Method

During the project, the PVSC was used in its exploratory version. This

approach provides managers with a tool to get to know how stakeholders think

about their company’s public value. The central question is: What makes your

organization valuable to society? Beringer used the Value Knowledge Guide

(WertwissensGuide - an adaption of the repertory grid) interview techniquexiv to

conduct interviews with 26 internal and external club stakeholders.

The interviewees were chosen to represent all relevant stakeholder

groups, namely the club itself, its fans, business, sponsors, the media, and

broader society. Beringer interviewed personalities such as Paul Breitner, a

former player and club consultant, Heinrich von Pierer, a former Siemens CEO,

and Herbert Henzler, a former European Chairman of McKinsey & Company.

These interviews gave Beringer 324 pairs of constructs, each of which

representing an aspect of the club’s public value and an alternative path to

action (e.g. How it should not become: Developing the club into a pure business

venture vs. FC Bayern’s visibility as a sports club). These construct pairs were

then clustered to carve out the club’s unique public values. The clustering was

done in a workshop with internal and external experts. The tensions between the

different public values were mapped on the basis of the construct pairs’

composition. These pairs not only represented alternative courses of action, but

also indicated the differences between the respondents and stakeholder groups.


207

The Results

FIGURE 1

Public Values of FCBxv

The above figure shows the club’s identified eight public values, which

cluster the results from the exploratory Public Value Scorecard interviews. This

tool allowed the club management to obtain information on its role in society

that went beyond classical market research. It became clear that the stakeholders


208

value the club’s role as a melting pot in which players and fans from different

origins and social backgrounds come together. Interestingly, one of the

identified public values is “community through polarization”. The club’s

polarizing capacity is actually regarded as a public value. In other words, you

cannot be indifferent towards the organization – you either love it or hate it.

Both attitudes, support and animosity, unite the respective groups and contribute

to a feeling of community. This means that the club management cannot expect

the public to ignore any of its actions and that fans and opponents will mostly

rate these differently. Simultaneously, however, it shows that the club’s often

lamented arrogance does actually contribute to its public value.

The club’s maximum drive for success is seen as a role model of

striving for performance. It always strives to be the number one and expects all

its players, other employees, and partners to constantly go an extra mile to

reflect their commitment. This performance culture is also manifested in the

club’s policy of “buying out” the best players from its competitors in the

German national league, thereby strengthening its team. Its board member

responsible for sports, Matthias Sammer, has made this commitment very clear

in a recent press statement in which he stated that: “We are in a merciless

competition … We always want to be the number one. We will do everything to

achieve this goal.” Clearly, such attitude is sometimes at odds with societal fair

play as a public value, which focusses more on football’s uniting character than

on its competitive character.

As the example of these public values shows, complexities and tensions

abound and public values cannot be examined individually. When Beringer

discussed the results of his initial research with Mennerich and presented him

with the eight public values, the two of them therefore quickly sensed that more

analysis was needed of how the different public values relate to each other.


209

Mennerich: “I really like what you did and think that this is an

important step in making the values, which are so

deeply ingrained in our club’s day-to-day life,

explicit. What you did also comes very close to the

image we reflect in our “Mia san mia”-brochure.

Your results would, however, be more actionable and

their managerial relevance would increase if you

added a dynamic component. Don’t you also think it

would be interesting to see how the identified values

interact with each other?”

Beringer: “Stefan, I’m really pleased that you agree with the

findings. We should of course go a step further and

analyze how the different public values relate to each

other. The data that I have collected allows such

analysis.”

Mennerich: “Then go right ahead! I am looking forward to the

results.”

Mennerich thus mandated and encouraged Beringer to take one further

step and analyze the possible tensions between the club’s public values.

In a workshop with internal and external experts, Beringer identified

the trade-offs between FC Bayern’s public values as revealed by the data he had

collected through his stakeholder interviews by means of the exploratory Public

Value Scorecard. Figure 2 below maps the public values, as well as the trade-

offs and tensions between them. Interestingly, the public values can be mapped

along the two axes: “local rootedness – global presence” and “identity through

polarization – integrative power/ FC Germany.” These axes indicate the basic

dimensions along which tensions may emerge, while the arrows indicate the

trade-offs between the public values. The arrow size shows how often a certain

trade-off was mentioned in the interviews.


210

FIGURE 2

Tensions between Public Values of FCBxvi

The trade-off most often quoted is between the public values

“maximum drive for success” and “societal fair play” (Arrow “A” in Figure 2).

The former describes the club’s attitude of always wanting to be a top performer

and to be counted as one of the most successful teams in Europe, whereas the


211

latter points to the club being a role model for social engagement and fostering

solidarity in society. However, these two values could collide if the club has to

decide between striving for success at any price (moral, as well as monetary)

and prioritizing its adherence to its values that go beyond mere victories. This

would, for example, be relevant if the club needs to determine whether to

purchase ready-made players on the international market, thereby ensuring

success, or to invest in its own youth teams and integrate young players from its

own talent development into the first team. The club management is very well

aware that the implications of its transfer policy go well beyond ensuring

success on the pitch. When asked in an interview whether FC Bayern risked

making the national Bundesliga a boring competition, Karl Heinz Rummenigge,

the CEO, replied:

“I have for weeks been pondering this question about what

our job exactly comprises. It is about composing a high-

quality team which plays football successfully? Further, it

is about which debate about morals we would trigger if we

were to purchase a player from a direct competitor? There

always are pros and cons.”xvii

A second trade-off is between the public value of the club’s Bavarian

identity and rootedness (manifested in the club’s Bavarian slogan “Mia san mia”

(“we are we”) and its global brand image and aspirations to be a global player in

the football industry (Arrow “B” in Figure 2). The club emphasizes its Bavarian

origins and roots. The club’s logo is the checkered blue and white pattern of the

Bavarian flag and its recently introduced Bavarian slogan is the self-confident

“Mia san mia”xviii. Further, the players appear in public in traditional

Lederhosen when celebrating victories, all of which point to the importance that

the club attaches to its Bavarian heritage. The club thus also fosters the Bavarian

people’s regional identity. Simultaneously, the club sees enormous potential for

growth in international markets, where even in non-traditional football countries

(such as China) an increasing number of people are engaging in the sport and


212

looking for a team to support. If the club wants to reach its economic goals

abroad, it also has to nurture its worldwide fans, as well as cooperation and

marketing partnerships. This could lead to a situation in which the needs of its

regional fans cannot be taken into account to the same extent as previously and

with the club losing touch with its fans in Bavaria and Germany. The following

dialogue on the club’s official Facebook channel in February 2014 illustrates

this potential conflict well:

User A: Why is everything here in English when it is the

official [FC] Bayern page? Damn!

User B: Because there are many international fans and

Germans also understand it [the Facebook page] ;-)

User C: I do not understand it.

User D: Can I read the article in German?!

User E: 1. There is an older generation of fans who did not

grow up in an internationalized society and therefore did

not have an opportunity to learn English. 2. It is also about

principles: FC Bayern is a Munich football club. One

expects them [the club] to communicate everything in

German or Bavarian. Or is this Facebook page only for

‘international fans’?”xix

A focus on global rather than regional markets can therefore lead to a

dilution of the club’s brand and identity. In addition, unhealthy growth and an

overly rapid global expansion might divert the club management’s attention

from its core business – managing a successful football team. However,

forfeiting opportunities for international growth and remaining stuck in Bavaria

might lead to a situation in which the club is not open to new influences and


213

development, and starts falling behind in terms of sport achievement and

financial means. The club therefore has to find a balance between its regional

identity and global growth.

A third trade-off is between financial strength and (short-term) sport

success (Arrow “D” in Figure 2). On the one hand, the club’s financial strength,

exemplified by its legendary “Festgeldkonto” (fixed-term deposit account), is

regarded as a public value, because the club is a role model of how to deal with

money prudently and achieve success sustainably. On the other hand, the club’s

drive for maximum success requires investments in new players and

infrastructure, which will allow the club to keep competing on an international

level. Rich patrons often enable such success, or debt can finance it (see Chelsea

London and Real Madrid as examples). FC Bayern’s prudent approach can clash

with its (short-term) success orientation when it bids for an outstanding player

on the international level, but a competitor, who incurs debt to buy that player,

outbids it. Here, the club has to find a balance between its short-term and long-

term orientation.

These trade-offs describe challenges requiring the club to balance its

competing goals and to simultaneously take two conflicting actions (e.g.

maintain its Bavarian identity and achieve global growth). These goal conflicts

can be characterized as a combination of exploitation and exploration, for

example, catering to the fans in the original market and making inroads into new

markets, or maximizing the club’s short-term success and ensuring tomorrow’s

financial strength. In the scholarly debate on management, the ability to deal

equally well with two incompatible goals, especially exploitation and

exploration, is called organizational ambidexterity.xx

Beringer presented his findings on the club’s public values and the

trade-offs between them to the club management. The results were received

with great interest and he was asked to derive actions which the club could take

to balance these ambidextrous challenges well.


214

TENSIONS ARE RESOLVED

A number of measures have been taken since then to deal with the

apparent paradox between global growth and local rootedness.

With its appointment of Jörg Wacker as the new board member

responsible for internalization and strategy in July 2013, the club emphasized its

internalization strategy in the organizational setting. Wacker drove the club’s

internalization recently with the opening of an office in New York City to

support its American market entry. He is also putting more emphasis on the

Chinese market. Nevertheless, Wacker is well aware that such growth has to be

based on the club’s roots. In a recent interview, he mentioned:

“Our activities are based on certain values that we find

extremely important. We want to convey what we

represent, for example, success, a sense of family,

tradition, a connectedness to home, innovation, as well as

sensible financial dealings. With these values we reach out

to people in different regions all over the world.”xxi

Further, the club has increased its reach by making information

available in an increasing number of languages on its different channels. Its

Facebook posts are in ten languages and it uses German, English, and Spanish

Twitter accounts. It has launched a presence on the Russian language social

network VKontakte and also on a Chinese social media platform. It has

launched an American website, an American mobile phone app, and an

American online shop to support its expansion into the American market.

Further, it employs an American presenter for an English news program about

the club. It has also relaunched its YouTube channel, in order to include more

languages and increase its international reach even further. These measures have

all had an impact. The share of international visitors to the club’s Facebook

page has increased from 50% in 2011 to more than 80% in 2014. The club’s


215

self-produced TV show is now broadcasted in more than 75 countries, while its

international supporter clubs have grown from 2.952 in 2010 to 3.774 in 2014.

However, the club does not only invest in gaining new fans on a global

scale, but also fosters its local Bavarian fan base. This is manifested in its use of

additional languages: The club has launched a version of the website in

Bavarian, the local German dialect spoken in Munich and surroundings. Before

every home game, the regional radio station, Bayern 3, raffles free tickets. With

a camera crew on hand, the winners are picked up from their homes and

conveyed to the stadium – all cost free – to underscore the club’s commitment

to its Bavarian roots. The club is also committed to the local media by giving

them privileged access to news. The FC Bayern Kids Club (www.fcb-

kidsclub.de) is a supporter club for children aged 6-12. It is directed at children

in Munich and other parts of Germany. According to Mennerich: “The Kids

Club is a strong statement emphasizing our roots here and aimed at the children

here, at our basis.”

The club has also taken the tension between international growth and

local embeddedness into account in core business decisions, involving

considerable financial consequences. For example, the club is part of a central

marketing system for TV rights to the entire German football league. By

participating in this system, the club also supports weaker and smaller clubs

which would earn less by selling the TV rights to their matches if they were to

market these individually. In addition, FC Bayern is pushing the broadcasting of

Bundesliga matches on free TV channels, as opposed to pay TV channels. In the

short run, this practice could lead to lower earnings; however, in the long run, it

makes the German football league as a whole more attractive and increases the

reach of football broadcasting. In turn, this increased reach will allow more

people to access this kind of entertainment, which will again drive the club’s

and the Bundesliga’s internationalization. The club’s digital media channels

have adopted a similar approach by making a lot of formerly paid content

available for free in order to increase its access and reach.


216

The club’s commitment to international growth and its local roots is

also manifested in the club’s cooperation with sponsors. Mennerich states: “Our

strategy is to work with global industry leaders and if they have their roots in

Bavaria, that is even better.” As mentioned previously, the club’s main

sponsors, which also hold minority shares in its football business, are the car

manufacturer Audi, the insurance group Allianz, and the sportswear producer

Adidas. All three firms have their roots and headquarters in Bavaria, but have

expanded globally and are among the foremost firms in their respective

industries. By cooperating with such firms, the club can also reconcile its global

ambitions and local roots in terms of sponsoring.

THE ROAD AHEAD – BACK TO THE FUTURE?

The FCB and its trainer Pep Guardiola are focused on athletic success

in the foreseeable future. In the 2014/2015 season, the club is once again a clear

frontrunner in the German national league. Nevertheless, its continuing

international growth and the opening of its office in the US and the marketing

strategy in China mean its balancing act between local rootedness and global

ambitions will be even more challenging in the future. Other major international

football clubs, such as FC Barcelona, Real Madrid, and Manchester United, are

pursuing a similar global expansion, but vary in their responses to the challenges

that this poses for their role in society. With its Catalan slogan “més que un

club” (more than a club) FC Barcelona has a public value associated with a

commitment to its Catalan identity, as well as to universality and a social

commitment.xxii Other clubs, such as Real Madridxxiii and Manchester Unitedxxiv,

seem to adopt a more conventional CSR strategy by operating charitable

foundations. Different clubs do, of course, need to adopt different approaches to

deal with their particular situation regarding dealing with growing pains. In

terms of public value, football clubs are very special organizations, as they

enjoy much more public attention than most other firms. Their core business


217

might be to play football, but their societal role and their public value creation

go far beyond that.

The Public Value Scorecard assessment and, especially, the mapping of

the tensions and trade-offs between the club’s public values, help the club’s

leadership anticipate the public value consequences of management decisions.

In a debrief meeting in September 2014, Jung, Mennerich, and Beringer

gathered in the same meeting room where they had initially kicked-off the

project. It was a warm, late-summer day and there were loads of supporters

outside the building cheering the players arriving for their training sessions. The

three managers were in a far more optimistic mood than at their initial meeting.

They considered the project a success and were confident that the right steps had

been taken to engage with that unknown animal called society, thus turning the

club’s public value into a resource in the process of aligning the club’s global

growth and its local roots.

Jung: “The public value assessment has really helped us to

further sharpen our brand and communicate what we

represent to a wider public. By investing in our

Bavarian heritage, we have successfully ensured that

the club will, in the long term, maintain its position as

an authentic brand in the football market.”

Mennerich: “Lorenz, thank you for this great work. We can build

our strategic management decisions on your results.”

Beringer: “Thank you, Andreas and Stefan, for your support

with this project. I really learned a lot from talking to

our stakeholders and collecting information.

However, what struck me most was that all this is not

really new, but has been the leitmotiv of our club for

most of its history. I became aware of this when I

recently watched the new Kurt Landauer movie.”


218

In this movie, Kurt Landauer, who was the club’s legendary president

during the post WW II reconstruction, states:

FC Bayern Munich will definitely revive the traditions that

it cultivated before the war: Its Bavarian heritage,

cosmopolitanism, and internationality. Professional

football is our guiding principle and we will – even more

than in the past – focus on developing our youth team.xxv


219

ENDNOTES

i Disclaimer: Co-author of this teaching case

ii Meynhardt, Timo. 2009. Public Value Inside: What is Public Value Creation?

International Journal of Public Administration 32 (3-4): 192-219;

Meynhardt, T. (2013). Public Value: Organisationen machen Gesellschaft.

OrganisationsEntwicklung. Zeitschrift für Unternehmensentwicklung und

Change Management. 4: 4-7; see also the video: Public Value: Common

Good and the Society on Youtube:

https://www.youtube.com/watch?v=tLGAQ4q_Sb0

iii Bausenwein, C., Schulze-Marmeling, D. (2012). FC Bayern München: Unser

Verein, unsere Geschichte. Göttingen: Die Werkstatt; Schulze-Marmeling,

D. (2009). Die Bayern – Die Geschichte des deutschen Rekordmeisters.

Göttingen: Die Werkstatt.

iv Brand Finance (2013): Brand Finance Football 50:

http://www.brandfinance.com/images/upload/brandfinance_football_50_hig

h_res.pdf

v FC Bayern München (2014) Website: http://www.fcbayern.de/de/club/fcb-

ag/organe/

vi FC Bayern München (2012): Jahresabschluss der Saison 2011/12:

http://www.fcbayern.telekom.de/media/native/pressemitteilungen/finanzzahl

en_2011_12.pdf

vii Deloitte & Touche (2013): Die Spielführer der Branche – Football Money

League, Berlin.

viii Exemplary quotes drafted by the authors


220

ix Spiegel online (2012): http://www.spiegel.de/politik/ausland/fussball-em-

bayern-praesident-hoeness-fordert-solidaritaet-mit-timoschenko-a-

830453.html

x Roßman, Fabian. (2013) on Goal.com:

http://www.goal.com/de/news/3642/editorial/2013/07/31/4147296/fc-

bayern-schr%C3%A4nkt-seine-fans-ein-drehkreuze-ja

xi Abendzeitung (2013): http://www.abendzeitung-muenchen.de/inhalt.fc-

bayern-muenchen-freier-blockzugang-in-der-suedkurve-test-

gelungen.66903155-d102-487d-bb2a-d167a8b67185.html

xii Roßman (2013)

xiii Meynhardt, Timo; Gomez, Peter; Schweizer, Markus (2014) – What makes

an organization valuable to society? EY Performance Journal 6(1): 1-8;

Meynhardt, Timo. (2015). Public Value – Turning a Conceptual Framework

into a Scorecard. In: Public Value and Public Administration, edited by

John. M. Bryson, Barbara C. Crosby and Laura Bloomberg. Georgetown

University Press. Upcoming book.

xiv See: Meynhardt (2015)

xv Beringer and Bernard (2013a), p. 73 (own translation).

xvi Beringer and Bernard (2013a), p. 91 (own translation).

xvii Rummenigge-Interview “Unser Geschäft ist irrational” in Der Spiegel

(10.11.2014)

xviii http://www.sueddeutsche.de/bayern/ursprung-des-fc-bayern-mottos-wer-

san-mia-1.1742394

xix www.facebook.com/fcbayern retrieved on 24.02.2014


221

xx Birkinshaw, Julian M. and Gupta, Kamini (2013). Clarifying the Distinctive

Contribution of Ambidexterity to the Field of Organization Studies.

Academy of Management Perspectives 27(4): 287-298.

xxi DER SPIEGEL, 28.07.2014 – Rakete auf der Rampe

xxii http://www.fcbarcelona.com/club/detail/card/fc-barcelona-the-members-club

xxiii http://www.realmadrid.com/en/about-real-madrid/foundation

xxiv http://www.mufoundation.org/

xxv Movie: Kurt Landauer – Der Präsident (minute 1:24) Available at

amazon.com, or contact the authors ([email protected])

222

223

PAPER 5:

SYSTEMIC PRINCIPLES OF VALUE CO-CREATION:

SYNERGETICS OF VALUE AND SERVICE ECOSYSTEMS

Timo Meynhardt, Jennifer D. Chandler, & Pepe Strathoff

January 2016

Abstract

While most investigations of value and value co-creation empirically

focus on either the individual micro-level or the collective macro-level, a

systemic perspective asserts that investigations at one level, in isolation from the

other, are incomplete. Based on synergetics and its core principles of emergence

and enslavement (consensualization), we argue that value is a systemic property

(i.e. an order parameter) that emerges from micro-macro links in service

ecosystems. We propose a framework that begins to unravel the complexity of

value co-creation and the dynamics of service ecosystem evolution. We

introduce nine systemic principles of value co-creation: critical distance,

stability, amplification, internal determination, nonlinearity and feedback,

phase transitions, symmetry-breaking, limited predictability, and historical

dependence. Based on these, we outline future research opportunities in three

areas: the moralization of markets, an acceleration of societal dynamics, and the

increasing embeddedness of service in society.

Publication: Journal of Business Research, 69(8): 2981-2989.


224

INTRODUCTION

Although there has been a surge of research on value co-creation in

recent years, the direct topic of value has not received equal empirical attention,

perhaps because value is inherently and implicitly present in any study that

investigates satisfaction, profit, or firm performance (Grönroos & Voima, 2013).

This includes studies that for instance emphasize value-creating practices

(Kjellberg & Hellgesson, 2006; Schau, Muniz, & Arnould, 2009), value co-

creation and co-production processes (Etgar, 2008; Payne, Storbacka, & Frow,

2008), value networks (Lusch, Vargo, & Tanniru, 2010), and value propositions

(Frow & Payne, 2011; Chandler & Lusch, 2015).

Fortunately, extant literature on service ecosystems has given some

form and substance to the study of value. The service-dominant logic (SDL)

literature places value at the center of service ecosystems, or systems of

resource-integrating actors (Lusch & Vargo, 2014), in which actors are joined

by value and, specifically, mutual value co-creation efforts (Vargo & Lusch,

2011). Societal megatrends such as a moralization of the markets (Stehr, 2007),

an acceleration of society (Rosa, 2005), and an increasing awareness of the

social embeddedness of economic actions (Granovetter, 1985) emphasize

mutuality in social systems, underlining the need for a systemic approach that

considers the dynamic properties of value co-creation.

Based on this, our proposed framework conceptualizes value as a core

organizing principle – or, what synergetics calls an order parameter – of service

ecosystems. Because value is simultaneously an individual and collective

phenomenon, it is important to study value at the micro-level, meso-level,

and macro-level of a service ecosystem (Chandler & Vargo, 2011). To do this,

we go beyond a network perspective that is rather static, to focus on the

dynamic aspects of system behavior across these levels (Lusch & Vargo, 2014;

Haase & Pick, 2015). Because value cannot be separated from either the

Paper 5: Systemic Principles of Value Co-Creation

225

individual micro-level (e.g. customer value) or the collective macro-level (e.g.

public value), it is necessary to develop a theoretical foundation for exploring

the systemic nature of value and value co-creation (Prahalad & Ramaswamy,

2004; Lusch & Vargo, 2006).

This is not to say that investigations of value and value co-

creation at either the individual micro-level or the collective macro-level

perspectives are incorrect; but a systemic perspective would view each of

these perspectives, in isolation from the other, as incomplete (Pires, Dean, &

Rehman, 2014). We emphasize that value – as a systemic property – cannot be

reduced to the individual or the collective level. Although this has been

acknowledged from the service ecosystems perspective (Chandler & Vargo,

2011), there has not yet been a comprehensive framework that accounts for

dynamic multilevel systems from an SDL perspective. As a result, it is difficult

to systematically assess and operationalize the (self-organized) workings of

service ecosystems. Current theoretical “tools” are insufficient for opening up

the black box “system” and clarifying its behavior. This leads us to the

following research question: What are the systemic principles of value co-

creation in service ecosystems?

We seek to contribute to the ongoing debate regarding value and value

co-creation within service ecosystems by drawing on self-organization theory,

namely synergetics, to catalyze a dynamic perspective on value as a systemic

property (Haken, 1977; 1984; 1993). The theory of synergetics, as developed by

Hermann Haken (Haken, 1977; Haken & Schiepek, 2005), can help us to

explain how individual experience (e.g. customer value) interacts with collective

phenomena (e.g. public value). Based on the idea of formalizing micro-macro

links (Alexander, Giesen, Münch, & Smelser, 1987) in a system, the synergetics

perspective formally articulates when and how a system order changes in a self-

organized way. Synergetics asserts that relatively stable macroscopic states tend

to emerge out of complex systems of interacting parts. In turn, these order

parameters inform how the parts abide by the rules of the game (enslaving or


226

consensualization). Its independence from a particular (social) scientific

discipline makes synergetics a suitable formalized apparatus for inquiry to the

dynamic properties of system behavior (Meynhardt, 2004).

Based on the core synergetic processes of emergence and enslavement1,

we introduce nine systemic principles of value co-creation: critical distance,

stability, amplification, internal determination, nonlinearity and feedback,

phase transitions, symmetry-breaking, limited predictability, and historical

dependence. These principles clarify the sensing and collating nature of value

co-creation when viewed from a systems perspective (Lusch, Vargo, & Tanniru,

2010). They begin to shed light on the complexity of service that has recently

become salient because intersections between the micro-level of value and

macro-level of value have blurred lines among the traditional tasks, roles, and

responsibilities of customers and firms (Jaakkola & Alexander, 2014; Piller,

Moeslein, & Stotko, 2004; Schau et al., 2009).

The paper is structured as follows. We explore the origins of the

service ecosystems concept, emphasizing how value has been conceptualized

within service ecosystems. We then explain how synergetics can help to clarify

value as a systemic property, and explain the nine systemic principles of value

co-creation. Subsequently, we provide illustrative examples of how a

synergetics approach can further our understanding of current phenomena that

alter the context in which value co-creation processes take place. We end with a

discussion of theoretical and practical implications.

1Enslavement is the technical term used in the synergetics literature for processes of top-

down ordering of the system according to the order parameter. Another term for this phenomenon is consensualization.


227

CONCEPTUAL BACKGROUND

Service Ecosystems

The service-dominant (SD) logic of value creation emphasizes

knowledge and skills as primary resources for exchange (Vargo & Lusch, 2004;

2008). By doing so, SD logic emphasizes the activities and processes of value

co-creation, rather than its outputs and outcomes. According to SD logic, these

activities and processes are catalyzed by service – the application of

competences for the benefit of others (Vargo & Lusch, 2004; 2008). This

intertwines an actor’s competences with the other actors’ knowledge, skills, and

competences (Lusch & Vargo, 2015). As a result, these actors are joined

together by service and their behaviors synchronize with wider market norms

and expectations (Akaka, Vargo, & Schau, 2015). Because of this, a service

ecosystem, or a “relatively self-contained, self-adjusting system of resource-

integrating actors connected by shared institutional logics and mutual value

creation through service exchange” emerges (Lusch & Vargo, 2014, p. 161).

Actors are thus joined because of mutual value co-creation efforts, and the

actors together constitute a self-adjusting, self-contained service ecosystem.

Viewing service in this way, we can begin to clarify the mechanisms of

self-organizing, complex, and adaptive systems because of the “multiple

interrelated actors, processes and systems that together move through phases

and cycles” in service ecosystems (Chandler & Lusch, 2015, p. 15). As these

different processes and actors jointly evolve over time, they effect change on

one another in nonlinear and dynamic ways. As a result, some service

ecosystems thrive, while others wither away (Vargo, Maglio, & Akaka, 2008).

To advance the SDL literature, the proposed systems-level theory offers some

explanation about why and how this occurs.


228

Value and Value Co-creation

We draw attention to value as a core organizing principle, or systemic

property, of a service ecosystem. Value binds together different systemic parts

in a coherent way (Edvardsson, Tronvoll, & Gruber, 2011). As a systemic

property, value cannot be understood by focusing only on a single component or

level of a service ecosystem (Corsaro, 2014; Akaka, Vargo, & Lusch, 2013). It

often involves large, expansive networks of actors (Tax, McCutcheon, &

Wilkinson, 2013). Because value is simultaneously an individual and a

collective phenomenon, the micro, meso, and macro levels of a service

ecosystem characterize its emergence (Xie, Bagozzi, & Troye, 2008; Chandler

& Vargo, 2011).

For these reasons, it is important to study value as unique to the service

ecosystem and context in which it emerges, as well as to the actor for whom it

emerges. The micro individual level of value is not isolated from a macro

collective level of value. The micro-level is embedded within a meso-level,

which is itself embedded simultaneously in a macro-level (Chandler & Vargo

2011). The meso-level focuses on a collective, intersection, or relationship of an

individual, while the micro-level focuses on the individual, and the macro-level

focuses on the environment in which the meso-level and the micro-level exist.

Thus, the meso-level points attention to ecosystem subsystems that interconnect

micro-levels and macro-levels of value (Pires et al., 2014).

These parts contribute holistically to the whole. The study of one level

without the other would be akin to for instance studying the value of the human

eye (micro-level) without studying the optic nerve and the brain’s ability (meso-

level) to translate signals into meaningful information for the body (macro-

level). The value of the human eye cannot be fully understood by simply

looking at the parts it is composed of (iris, pupil, ocular lens, etc.). Rather, if we

are to make sense of the eye and understand its value, we need to look at it as

part of our complex visual and cognitive system.


229

Similarly, the disparate elements of a service ecosystem make more

sense when they are viewed as synergistic parts of a whole, especially

concerning value. Any individual actor that experiences value does so in a

specific context while, conversely, value that is realized in a specific context can

be shared by an individual in that context. Thus, the mutual constitution of

individuals and their contexts makes it difficult to study value as extracted from

one level vs. another (Giddens, 1984).

A SYNERGETICS PERSPECTIVE OF VALUE CO-

CREATION

What is Synergetics?

To explore the dynamic interplay between individual and collective

value, we draw on the synergetics literature. Synergetics furthers our

understanding of how value emerges as an order parameter, and offers

principles that clarify how bottom-up emergences and top-down enslavement

unfold in service ecosystems (Ebeling & Feistel, 1994; Meynhardt, 2004).

Synergetics is based in the natural sciences but has also been applied to other

disciplines such as management, economics, and psychology (Haken &

Mikhailov, 1993; Haken & Schiepek, 2006). It offers principles that cannot be

found in other theories, such as autopoiesis by Maturana and Varela (1987),

describing self-reproduction of organisms, or Giddens’ structuration theory

(1984), with its focus on the interplay between action and structure, or Weick’s

concept of sensemaking (1995). While these theoretical approaches emphasize

nonmechanistic processes and phenomena that elude linear causalities, only

synergetics offers a formal approach that explains when and how a system’s

order changes in a self-organized fashion. According to synergetics, order

parameters inform and define how the parts of a system abide by the rules of the


230

game through processes of enslaving or consensualization, as we will explain

below (Meynhardt, 2004).

We begin by asserting that value is situated in the social environment

of a market object and a subject’s appraisal of the object. On the one hand,

viewing value in this way emphasizes the recent conceptualization of service

experience that establishes a role for service in shaping collective value beyond

an economic transaction (Meynhardt, 2009). The idea is that a third-party (often

a firm) can influence the service experience so as to influence a subject’s

appraisal of an object. On the other hand, this perspective also underscores the

unpredictable individual psychological process of valuing (Eagly & Chaiken,

1993). The emphasis is on individual engagement in value co-creation, which

can range from a literal, physical, or emotional involvement to the conscious

shaping of context to enable certain experiences (Chandler & Lusch, 2015).

Owing to this mechanism for engagement, individual actors often become

integrative mechanisms of larger value co-creation systems (Brodie, Hollebeek,

Juric, & Ilic, 2011).

As Vargo and Lusch argue, “co-creation of value is not an option”

(2009, p. 9). Thus, it is necessary to explore the distinction between objectivist

and subjectivist views of value. Value objectivists basically argue that value is;

in other words, they argue that value is a characteristic of an object, embedded

in matter, almost physically attached to it. This view implies that value exists

regardless of somebody valuing and thus leads to the question how value can be

identified and experienced (Dworkin, 2011). However, value subjectivists

basically argue that something has a value – that value is not determined as an

external entity or truth but is agreed upon through evaluation. This view

emphasizes the roles of individual actors in identifying, realizing, and creating

value while processing information and experiences. The language of being vs.

having value to describe the positions of value objectivists and value

subjectivists has been used by Heyde (1926).


231

Attempting to reconcile the objectivist and subjectivist views, Heyde

(1926) highlights the location of value and the process of human appraisal that

occurs within particular relationships and social contexts. Value is seen to

emerge from a relationship between an object and a subject who is valuing the

object. Value does not exist independently of this relationship. Value is thus an

emergent order parameter that is based on a relationship; it requires subjects to

relate to, or value, an object(s) in order for value to exist. Through the act of

valuation (i.e. evaluation), value comes into being as an emergent phenomenon.

Because service triggers relationships, and these relationships form the

context in which value emerges (ecosystem), value is not a separate entity with

its own ontological status. By focusing on value as an order parameter, system

analysis need not rely on a detailed analysis of the parts of a service ecosystem

(firm behavior, individual consumers, etc.) (Ebeling & Feistel, 1994;

Meynhardt, 2004). Rather, focusing on value as an order parameter can help one

to compress complex information about service ecosystems by revealing the

quality of the system as a whole. In other words, clarification regarding the

location and nature of value (i.e. the nature of relationships among individuals

and parts) are at the heart of understanding a system.

Relationships and the individual parts they connect constitute service

ecosystems. Service ecosystems include relationships that mediate how

individual experiences intersect with societal norms and/or market trends.

Desires, needs and evaluative efforts are not independent from the service

ecosystems or the social contexts in which they occur. Thus, concerning value

co-creation in service ecosystems, synergetics outlines a perspective that

accounts for multilevel interactions. As illustrated in Figure 1, systemic (macro-

level) properties emerge from the interactions of a system’s parts (micro-level)

(Haken, 1977; 1984; 1993). This often follows a nonlinear process that is

catalyzed when the system is destabilized from its old state. Synergetics asserts

that fluctuations from state to state occur until, finally, a coherent new

macroscopic state takes hold (see Figure 1, on the left). These order parameters


232

exist as long living systems that enslave short living systems (the parts),

influencing them to abide by the rules of the game (Haken, 1984) (see Figure 1,

on the right). The interplay between emergence and enslaving is a central tenet

of the approach (circular causality).

FIGURE 1

The Principle of Order Parameter

Note: adapted from Meynhardt, 2004, p. 84

Because of this, the micro-macro link is important, because it is the

mechanism upon which the ordering of a service ecosystem can emerge, change,

or solidify. Such micro-macro links can often be captured as relationships. As

shown in Figure 1, circular causality occurs when micro-level elements

(individuals, groups, etc.) interact; this catalyzes emergences of macro-level

Order parameter

Parts

Makro level

Micro level

Emergence:

Parts create order parameter

Enslaving:

Order parameter consensualizes parts

Macro level


233

properties (e.g. shared worldviews, norms, values in context). It is not one

element or the other that gives rise to an emergence; rather, it is the relationships

– and the relationships among the relationships – between the elements (and the

elements themselves) that give rise to emergences. Over time, these emergent

patterns (order parameters) gradually give order to – and, in some cases –

coordinate most micro-level elements. Generally, they provide the system with

coherence and orientation. The macro-level properties can enslave a system’s

elements (see Figure 1), because the micro-level elements cannot escape these

systemic properties. This is because a solid logic enmeshed in mutual, systemic

value co-creation efforts binds the elements to the system. Elements that do not

adhere to this logic fall away from the system, while elements that adhere to the

logic are strongly attracted to the system.

In these ways, micro-macro links provide a fundamental mechanism for

self-organization in service ecosystems. Macro-level properties emerge from

micro-level interactions in ways that are not determined by any single element

in the system. Yet, interestingly, changes in macro-level properties can also

stimulate change in micro-level elements. Once firmly established, macro-level

properties can enslave micro-level elements and, when this occurs, such

properties can be referred to as order parameters (e.g. a trend, a collective

preference, a cultural norm or attitude). These systemic properties are emergent,

i.e. they are qualitatively different from a mere sum of the parts. They form a

gestalt that cannot be discovered by simply looking at the parts and adding them

up.

Based on this, as Meynhardt (2004) explains, micro-level value and

macro-level value2 are related in the following ways. At the micro-level,

psychological processes form elements (e.g. motivation, emotion, affect, etc.) in

the system. If an evaluation of a product or service is perceived as a positive

contribution to one’s own basic needs (fulfilment/satisfaction), value is created.

2 For a detailed description of emotional self-organization and different views in psychology, for instance on unconscious and conscious evaluations, see Meynhardt, 2004.


234

The current order parameter is stabilized. However, if there is a negative

(conscious or not) evaluation, various psychological mechanisms accommodate

it (e.g. distortion, denial). Past experience is questioned, established practices

and routines no longer work – and an actor may for instance feel psychological

discomfort (Festinger, 1957). In such situations, the system might be

destabilized to a point where elements can ‘break free’ of an ‘old order’, and a

‘new order’ parameter can emerge (see Figure 1, on the left). However, the main

point is that the system stabilizes the new order via feedback to individual actors

(Figure 1, on the right). In this circular process of bottom-up emergence and

top-down consensualization (enslavement), the parts – together – lead to a

collective, systemic property – that is, a systemic emergence arises. This is

shown in Figure 1.

Order parameters only change when a system is critically destabilized

(e.g. a massive loss of trust or a frame-breaking experience). But once the old

order is critically challenged (bifurcation points), the system behavior becomes

largely unpredictable. Different emergent order parameters may compete with

each other or stabilize each other, such that the system oscillates between

different states until a new equilibrium is achieved. If a certain mode of value

co-creation loses its function as the order parameter in a service ecosystem (e.g.

the traditional cab ride for inner city transportation), it might for a while be

unclear what the new mode of value co-creation would look like (e.g. car-

sharing vs. ride-sharing vs. public transport). In such systemic states where an

order parameter has been destabilized and a new one has not yet been

established, there is much space for diversity and the coexistence of competing

order parameters. Very small fluctuations and interactions can then exert large

consequences as they might push a system over a tipping point, after which a

certain new order parameter can emerge and can dominate the system. In the

following paragraph, we take a closer look at a number of principles that

provide a more detailed understanding of service ecosystem behavior and value

co-creation.


235

Systemic Principles of Value Co-creation

Based on synergetics and its core processes of emergence and

enslavement, we propose nine systemic principles of value co-creation in

service ecosystems: critical distance, stability, amplification, internal

determination, nonlinearity and feedback, phase transitions, symmetry-

breaking, limited predictability, and historical dependence. As shown in Table

1, these are based on work by Ebeling and Feistel (1994).

Each systemic principle is detailed below and illustrated with an aspect

of the failed introduction of New Coke in 1985. This move was an attempt by

Coca-Cola to replace its existing original soft drink with a similar but even

sweeter product in order to stop the rise of its competitor Pepsi. The new

product fared very well in consumer research and a vast majority of subjects

preferred it over both the original recipe Coke and Pepsi in blind tests. However,

when the new product was introduced in April 1985, replacing the original one,

consumers were outraged that ‘the real thing’ was removed from the market.

Sales plummeted, and Coca-Cola was caught by surprise by the public’s passion

for its original product. In July 1985, the company reintroduced the original

Coca-Cola.3

3 For a more detailed account, see www.marketing91.com/coca-cola-brand-failure

TABLE 1

Systemic Principles of Value Co-Creation

Systemic principle Systems theory foundation

(based on Ebeling and Feistel, 1994: 40) Relevance for value co-creation in service ecosystems

Systemic principle 1:

Critical distance

Self-organization only occurs if a system

is beyond its equilibrium; only under

conditions of uncertainty and/or arousal can stable values be challenged.

A stable service ecosystem (in equilibrium) has its own propensity to continue on its

unique trajectory into the future. Only when a service ecosystem is in disequilibrium can

value propositions elicit new logics or orders of engagement. Based on the systemic principle of critical distance, value can be co-created by participating according to the

existing logic of the service ecosystem.

Illustrative example: The New Coke formula was not attractive enough to critically challenge the original one.


Stability

System stability depends on the intensity

of perturbations; relative stability against small perturbations. In stable

environments, a system is relatively

reluctant to change.

Established service ecosystems in stable environments adhere to the established logic.

Based on the systemic principle of stability, value can be co-created by ensuring continuity of the service ecosystem.

Illustrative example: Versions of Coke such as Diet Coke, Caffeine-Free Coke could not

destabilize the general appraisal, but New Coke led to reactions of systemic resistance.


Amplification

In transition periods, there may be

fluctuations among subsystems within a

system; amplifications influence emergences.

In service ecosystems, fluctuations can arise from new evaluations, trial-and-error,

creative search processes, and new amplified modes. Based on the systemic principle of

amplification, value can be co-created by catalyzing emergences and making the optimal emergences more salient in the service ecosystem.

Illustrative example: Unexpected customer reactions were amplified without warning.


Internal

determination

Emergences heavily depend on existing

internal parameters; they can never be solely injected into a system by an

external force. Further, it is impossible to

predict systemic reaction to external

forces because of the internal stability.

Service ecosystems have a stable logic that largely determines systemic emergences.

Owing to this, the effects of external efforts to inject new parameters to an existing service ecosystem are generally unpredictable. Based on the systemic principle of

internal determination, value can be co-created by allowing for emergences.

Illustrative example: Without knowing the system with its parts and internal dynamics, isolated, classic market research may fail utterly. In the New Coke example, at the outset,

success was predicted.


Nonlinearity and

feedback

Self-organization requires nonlinear

dynamics, basically caused by feedback loops.

Service ecosystems facilitate (social) psychological internalization (i.e. the establishment

of new subjective evaluations and preferences). Based on the systemic principle of nonlinearity and feedback, value can be co-created by seeking and understanding

nonlinear dynamics in a service ecosystem.

Illustrative example: In the beginning, only 12% of tasters expressed dislike when testing

New Coke. But during the process, this minority gained huge influence.


Phase transitions

Processes of self-organization are

analogous to phase transitions in equilibrium. A change in values

(individually and collectively) is

experienced as a transition from one stable state to another stable state.

Service ecosystems are dynamic, continuous, and ever-changing. Based on the systemic

principle of phase transitions, value can be co-created by enhancing changes in a service ecosystem.

Illustrative example: A new order emerges in a process of synchronization until yet

another equilibrium is achieved. This was not achieved with New Coke.


Symmetry-breaking

New orders are realized only after an

emergence has become established as an

order parameter.

While emergences are at first unpredictable, over time, they become more established

and can catalyze new order parameters for service systems. Based on the systemic

principle of symmetry-breaking, value can be co-created by emphasizing a new order or logic in a service ecosystem.

Illustrative example: A new order could not be established, because the new recipe did

not emerge as a systemic order parameter.


Limited

predictability

The result of irregular (chaotic)

processes is not predictable beyond the

short term.

The individual or social process of changing values cannot be predicted. Based on the

systemic principle of limited predictability, value can be co-created by expecting changes

in the long-term viability of a service ecosystem. Illustrative example: See the list of New Coke resistance actions.


Historical

dependence

A system can only be understood on the

basis of insight into its developmental

history.

To understand a certain system of subjective evaluations, one needs to know its history.

A single connection or link between actors can seldom be understood by itself. Based on

the systemic principle of historical dependence, value can be co-created by viewing the service ecosystem holistically and historically.

Illustrative example: In the Coke example, one needs to know the basic history. Coca-Cola has been around since 1886, and thus already had a long history by the time New

Coke appeared in 1985.


238

Systemic principle 1: Critical distance. Self-organization only occurs

when a system is beyond its equilibrium – stable values can be challenged only

under conditions of uncertainty and/or arousal. A stable service ecosystem (in

equilibrium) has its own propensity to continue into the future on its unique

trajectory. Value propositions can elicit new logics or orders of engagement

only when a service ecosystem is in disequilibrium. The introduction of New

Coke was a case in point: The system was in a very stable equilibrium, with the

parts (the consumers) strongly attached to the order parameter of the original

formula. Therefore, New Coke could not lead to a reorganization of the system.

Systemic principle 2: Stability. System stability depends on the

intensity of perturbations or disturbances; there is strong stability against small

perturbations in systems that are in equilibrium. Thus, in stable environments, a

system is relatively adverse to change. Based on this, established service

ecosystems in stable environments adhere to the established logic. The

introduction of new versions of Coke such as Diet Coke or caffeine-free Coke

did not lead to strong systemic reactions, as the perturbations were too small.

However, the introduction of New Coke along with the withdrawal of the

existing product led to strong systemic reactions.

Systemic principle 3: Amplification. In transition periods, there may be

fluctuations among subsystems within a system; amplifications influence

emergences. In service ecosystems, fluctuations can arise from new evaluations,

trial-and-error, creative search processes, or new amplified modes. In the New

Coke example, some negative customer reactions developed into outrage by

people who regarded the ‘real’ Coca-Cola as part of their American identity.

Even Fidel Castro stated his opinion by pointing out that New Coke was a

symbol of American capitalism’s decadence. When a small change in the sugar

content of a soft drink triggers such reactions, we observe amplification

dynamics.


239

Systemic principle 4: Internal determination. Emergences depend

strongly on existing internal parameters; they can never be injected into a

system by an external force. Further, it is impossible to predict systemic

reactions to external forces owing to systemic internal stability. Established

service ecosystems have a stable internal logic that largely determines the

emergence of order parameters. Because of this, the effects of external efforts to

inject new parameters into an existing service ecosystem are generally

unpredictable. With the introduction of New Coke, Coca-Cola attempted to

externally determine an order parameter without knowing or appreciating the

system’s internal dynamics. It did not understand that the strong role of its brand

in the eyes of the public was not due primarily to its taste, but to it being a

symbol of American patriotism and originality. Thus, the market research,

which relied on blind testing, led to erroneous predictions.

Systemic principle 5: Nonlinearity and feedback. Self-organization

follows nonlinear dynamics that are basically caused by feedback loops. This is

one reason why, in complex systems, the macro-level is different from a

summation of its micro-level parts (emergence). Service ecosystems facilitate

(social) psychological internalization (i.e. the establishment of new subjective

evaluations and preferences). Based on the systemic principle of nonlinearity

and feedback, value can be co-created by seeking, understanding, and acting

according to nonlinear dynamics in a service ecosystem. In the New Coke case,

consumers, when asked individually, preferred the new formula over the old

one. However, as a collective forming a public, they strongly objected to it, and

the initial minority that refused New Coke gained huge influence.

Systemic principle 6: Phase transitions: Processes of self-organization

are analogous to phase transitions in equilibrium. A change in values

(individually and collectively) is experienced as a transition from one stable

state to another. Service ecosystems are dynamic, continuous, and ever-

changing. Based on the systemic principle of phase transitions, value can be co-

created by enhancing changes in a service ecosystem and embracing emerging


240

equilibria. In the New Coke example, the system was destabilized away from

equilibrium, but finally returned to the same equilibrium – the same stable state

it was in before.

Systemic principle 7: Symmetry-breaking. New orders are realized

only after an emergence has become established as an order parameter. While

emergences are unpredictable at first, over time, they become more established,

and can catalyze new order parameters for service systems. The failed

introduction of New Coke is an example of a case in which a new order could

not be realized, since the new phenomenon (the New Coke recipe) could not be

established as a systemic order parameter.

Systemic principle 8: Limited predictability. The result of irregular

(chaotic) processes is not predictable beyond the short term. The individual or

social processes of changing values cannot be predicted. The fact that the

predictions derived from consumer research proved entirely wrong and the

variety and extent of resistance actions in the New Coke example underline the

limited predictability of system behavior.

Systemic principle 9: Historical dependence. A system can only be

understood based on insight into its developmental history. To understand a

certain system of subjective evaluations, one needs to know its history. A single

connection or link between actors can seldom be understood by itself. In this

sense, a complex system is unlike a board of chess, where all information

relevant for future actions can be derived from the current position of the

chessmen on the board. Many Americans’ attachment to the original Coke

recipe cannot be understood without considering the company and its product

history since 1886.


241

DISCUSSION

General Discussion

Our proposed framework deepens and develops the service ecosystems

perspective by outlining dynamic mechanisms by which service ecosystems

evolve. Based on synergetics and its core principles of emergence and

enslavement, we introduced nine systemic principles of value co-creation:

critical distance, stability, amplification, internal determination, nonlinearity

and feedback, phase transitions, symmetry-breaking, limited predictability, and

historical dependence. These principles clarify the complexity of value co-

creation when viewed from a service ecosystems perspective.

Specifically, each of these principles can extend how service

ecosystems are viewed and studied (as shown in Table 1). Each principle

corresponds with a different stage of system evolution. For instance, according

to the systemic principle of critical distance, a stable service ecosystem (in

equilibrium) has its own propensity to continue on its unique trajectory into the

future. This propensity entails that a service ecosystem in equilibrium does not

easily adapt to new logics or orders of engagement. So, in these situations, value

can be co-created by participating according to the service ecosystem’s existing

logic. Additionally, as outlined by the systemic principle of stability, established

service ecosystems in stable environments are more likely to adhere to

established logics. In these situations, value is co-created by ensuring continuity

of the service ecosystem, as well as the status quo in its environment.

However, if systemic change is desired, or if it is observed, value is co-

created in the system via the emergence of new order parameters. Such

emergences arise from system-level fluctuations that radiate from different parts

of the system – including new evaluations, trial-and-error, creative search

processes, or new amplified modes. Thus, based on the systemic principle of

amplification, systemic change can arise from the magnification of potential


242

emergences in a service ecosystem. However, outcomes of such efforts are

difficult to predict, because – as asserted by the systemic principle of internal

determination – most thriving service ecosystems resist external efforts to inject

new order parameters. It is not that there will be an absence of an effect; rather,

it is often the case that the effect cannot be easily determined or controlled. As a

result, value is co-created by allowing space for emergences to mature.

When systems are already in disarray, value can order a service

ecosystem according to the systemic principle of nonlinearity and feedback.

Here, conventional cause-effect mechanisms are not as helpful to study as

feedback loops (circular causality), which indicate which parts of service

ecosystems drive the dynamic, continuous, and ever-changing nature of the

system. For instance, a service ecosystem perspective views (social)

psychological internalization (i.e. efforts to establish new evaluations or

preferences) as a feedback loop that facilitates or inhibits change (i.e. that

stabilizes the existing order). When old preferences diminish, new preferences

may alter behaviors in the system, which – in turn – may change the nature of

the system. The change(s) may not be immediately evident, and such efforts

might require time and effort. What is important here is that a feedback loop

catalyzed the change(s), which then altered the system’s characteristics.

This points to the systemic principle of phase transitions. Because it is

necessary to recognize the characteristics of a service ecosystem as it moves

through time, it is important to recognize system evolution in stages. As noted,

while emergences are at first unpredictable, over time, they become more

established and recognizable. Eventually, they may catalyze new order

parameters for a service ecosystem. Through this process, the system takes on

new characteristics. According to the systemic principle of symmetry-breaking,

value is co-created when a new order or logic in a service ecosystem enhances

the system’s vitality. This may influence individual or social processes of

changing values, but cannot be controlled or predetermined – as asserted by the

systemic principle of limited predictability. It is expected that change is constant


243

and necessary to ensure the long-term viability of a service ecosystem. And,

finally, to understand a system, one needs to know its history. A single

connection or link between actors can seldom be understood by itself, much like

a single photo taken during a motion picture can seldom capture the storyline

and character development of a screenplay. Based on the systemic principle of

historical dependence, a service ecosystem must be viewed holistically as

uniquely determined by its idiosyncratic trajectory.

Every service ecosystem is unique and complex. As firms and

customers become more integrated owing to technology and globalization, the

context in which the nine systemic principles of value co-creation play out is

also changing. To illustrate this, consider three areas of society that are

undergoing significant transformation: the moralization of markets, an

acceleration of societal dynamics, and the increasing embeddedness of service

in society. From a synergetics perspective with a focus on service ecosystems,

we can see these developments as changes in a system’s control parameters.

Control parameters are system-external factors that influence system behavior,

but are not changed through the system. In physical systems, one might think of

temperature or air pressure; in social systems such as service ecosystems, one

can think of broader societal developments, such as the ones described below.

Certainly, with another focus of enquiry or a higher aggregation level, these

could also be conceptualized as order parameters within the system.

Systemic Value Co-creation and the Moralization of the Markets

First, according to Stehr (2007), global-level growth in prosperity,

knowledge, and skills have contributed to a moralization of the markets, which

refers to the influence that increased consumer politics, consciousness, and

mindfulness have had and continue to have on market exchange. In other words,

social norms, cultural world views, and non-economic interests have exerted

more influence on contemporary markets than they did in yesteryear, when

markets were more dominated by self-interest and mechanistic acquisition of


244

money. This includes for instance a consciousness that is attached to the types

and manners of service and production by firms; firms must now be more

transparent in their manufacturing processes and market entry efforts and must

ensure that these activities are ethical and socially responsible. At the same

time, modern communication tools (e.g. social media such as Facebook,

LinkedIn, or Twitter) have enabled customers and interest groups to gather and

disseminate information among themselves; this leads to order parameters that

can influence market moralization, because firms learn about consumer

sentiment, perceptions, and attitudes via social media. These feedback loops

render salient the demands made by ‘political’ or ‘ethical’ customers (e.g.

Harrison, Newholm, & Shaw, 2005). This has contributed to faster transitions

between systemic states: a continuous moralization and re-moralization of

markets according to amplified emergences.

However, it has become ever-more difficult for firms to focus on single

and isolated stakeholders, especially when there may also be incompatible

demands and interactions that are hard to analyze (Walsh, 2005). Too many

diverging expectations, unknown preferences, and legitimacy issues make it

almost impossible to engage uniformly with stakeholders (Phillips, 2003). The

following research questions can be investigated: What are the factors that

influence the timing and continuity of systemic transitions in moralized

markets? Should an emergence be amplified? If so, when and how can an

emergence be amplified? Are these principles characteristic of all service

ecosystems? How can heterogeneous stakeholders be dealt with in moralized

service ecosystems?

Systemic Value Co-creation and the Acceleration of Society

A trend of acceleration (Rosa, 2005) in modern society, characterized

by high instability and change, calls for research into the orientation, adaptation,

and learning capabilities at every level of a service ecosystem. Rosa (2005)

argues for an increased need to ‘coordinate’ at the macro-level in order to


245

reconcile the accelerated speed of economic processes, the pace of life, and the

relentless chasing of social change. Publicly sensitive topics such as pollution,

food quality, or medical progress concern society as a whole. At the micro-level,

these topics manifest as anxieties, hopes, opinions, or perceived fairness, for

instance, and can determine the evaluation of a product, service, or firm. This

issue is even more salient since, owing to the increasing strength of business

relative to government in terms of organizational and financial resources, more

and more demands concerning the production of social goods are directed

towards firms instead of the government (Moore & Khagram, 2004). The

following research questions can be investigated: What does systemic

enslavement look like? What become of the elements of a system that fall away?

How does the general acceleration of society impact on service ecosystems?

Systemic Value Co-creation and Social Embeddedness

Granovetter makes clear that “there is evidence all around us of the

extent to which business relations are mixed up with social ones” (1985, p. 493).

Similarly, Layton (2011) proposes that economic exchange is at all times

embedded in an institutional, social, and cultural context. Service managers

need to consider multiple stakeholders’ perspectives. Value co-creation

relationships extend beyond the traditional dyadic bonds (company-customer)

that have been associated with exchange relationships (Vargo, 2009). The

following research questions can be investigated: What are the best practices for

cultivating system equilibrium? When a service ecosystem is thriving, how does

a manager ensure its continuity? How are service ecosystems affected by social

embeddedness?


246

IMPLICATIONS

Research: The Interplay between Customer Value and Public Value

Value is a systemic property that exists at all levels of a service

ecosystem, including the micro-level, meso-level, and macro-level. Against the

background of co-creation, the moralized and accelerated society in which

service is embedded cannot be addressed without controversy, because many

different elements are simultaneously catalyzing emergences in a stable system;

this illustrates the systemic principles of critical distance, stability, and

amplification. This draws attention not just to immediate micro-level actors such

as customers, but also to meso-level actors such as special interest groups,

lobbyists, or socially conscious consumers as well as macro-level actors such as

governments and institutions that may potentially want to disrupt established

systems. Such disruption would illustrate the systemic principles of internal

determination, nonlinearity and feedback, and phase transitions. If a firm co-

creates value with a specific customer, but destroys value for all other actors in a

system, it risks systemic disruption; micro-level value conflicts with macro-

level values. The firm risks losing its license to operate. In this way, co-creation

can lead to positive and negative value at the same time, thereby illustrating the

systemic principles of symmetry-breaking, limited predictability, and historical

dependence. An essential question here is the consistency between the firm’s

value proposition and its corporate strategy. The firm’s core values and core

purpose are defined in the corporate mission statement, and these should be

ideally aligned with the external environment in which the firm competes in

order for the service ecosystem to thrive.

Because value co-creation is a key characteristic of service ecosystems,

the proposed framework shows how value as an order parameter can be better

understood by employing a synergetics approach. If we take the co-creation

perspective seriously and apply it to the link between micro-level and macro-


247

level, we need to analyze its mutual impact and synergetic interplay. For

instance, questions articulated at the macro-level (Meynhardt, 2009) can be

worded for the micro-level using the criteria of customer value configuration

(Belz & Bieger, 2004, p. 101). Table 2 shows how micro-level customer value

can be related to macro-level public value. Customer value propositions (left

column) focus on delivering a particular product or service and experience to

individual customers. This includes emotional aspects of a product, how well its

use is explained, how high its quality is, and how cost-effective it is for the

customer (Belz & Bieger, 2004). A public value perspective (columns 2 to 5)

places the value proposition of a product or service into a societal context and

asks what the properties of the customer value proposition mean for societal

value dynamics and the value that individuals can derive from being part of a

social collective. Accordingly, public value creation has been defined as “any

impact on shared experience about the quality of the relationship between the

individual and ‘society’” (Meynhardt, 2009, p. 212). Table 2 contains

exemplary questions to be asked from a public value perspective along the four

public value dimensions (see Meynhardt, 2009). For instance, quality (e.g. food

ingredients) as a customer value is placed into a broader context by asking how

this value proposition affects society’s functioning (e.g. the prevalence of

obesity).

From a systems perspective, we argue that customer value and public

value are linked in a synergetic interplay. This leads to a value proposition that

links micro-level value and macro-level value in concrete terms – that is, the

value proposition purposefully relates the micro-level, meso-level, and macro-

level to one another. Thus, capitalizing on value dynamics requires a framework

that explicates both chances and limits.


248

TABLE 2

Relationship between Customer Value and Public Value

Customer

value

(focus on the

individual)

Public value functions (focus on society)

Ethical-moral Political-social Hedonistic-

aesthetic

Instrumental-

utilitarian

Emotion What type of

acknowledgem

ent and

valuation of the

sense of self-

worth/identity

do we want to

achieve through

customer

value?

How much

personal

responsibility

do we want to

remove from or

ascribe to the

individual

customer

through

customer

value?

How do we

justify dealing

with customers

ethically in a

differentiated

way?

What culture

of

interpersonal

contact do we

want to

promote in

realizing

customer

value?

What

interests of

groups or

stakeholders

in society will

be

strengthened/

weakened by

the customer

value?

What kind of

social

dialogue do

we want to

conduct by

implementing

individual

customer

values?

What

negative

experiences

do we want to

avoid through

each

individual

customer

value?

What positive

experiences

do we want to

promote

through

customer

value?

What

experiences

among

noncustomers

are we

striving for as

a company or

do we want to

avoid?

What is the

basis of every

individual

customer

value

concerning

facts and

content?

How is the

use value for

the customer

instrumental

for a

functioning

society?

What

standards of

problem-

solving do we

want to set

and determine

through every

customer

value?

Relationship

Explanation

Individuali-

zation

Relief/

Security

Quality

Innovation

Cost-

effectiveness

Speed

Coordination

Note: adapted from Meynhardt and Stock, 2009, p. 56


249

Further research may conceptualize a co-creation relationship at

different levels by applying synergetic ideas of order parameters’ emerging /

enslaving processes as well as ideas of phase transitions by applying the self-

organization principles introduced above. It calls both approaches to better

understand a system’s history and context, and methodologies to identify

emerging instability points or amplifications of certain states. It points in

particular to process studies (Pentland, 1999) and the reconstruction of patterns

and system properties (order parameters).

Practice: Identifying Opportunities for Co-creation

Our research also has some implications for practice, especially for

managers who continuously deal with that “unknown animal called society”.

Systemic principles such as nonlinearity, internal determination, and historical

dependence call for the extensive collection of process data, in order to be able

to spot early weak signals that might be harbingers of systemic change. The fact

that service ecosystems are self-organizing and thus fairly resistant to external

‘shocks’ points to a humble attitude to attempts to change shared values in

society. The New Coke example is a case in point. It demonstrates that attempts

to manage against stable system logics are prone to fail. To be successful,

managers need to accept the system dynamics as they are, but need to be able to

spot irregularities in patterns that might destabilize the system. In such

situations, their potential for successful interventions is multiplied, owing to

amplification and feedback loop dynamics. However, these windows of

opportunity, where quick and resolute actions have the potential to shape long-

term trends, tend to be infrequent and temporary. This observation points again

to managers’ need for collecting on-time process data, in order to be able to take

appropriate actions.

Increasing moralization of the markets as well as acceleration of and

embeddedness in society have forced firms to face the question of the extent to

which their products and services are perceived as valuable for the community


250

beyond customer value. However, because examining all stakeholders in so

many different ways would not be practical (Walsh, 1995), it is preferable to

also reflect more abstractly on a societal level: value creation for the community

legitimizes the entrepreneurial activity in the sense of a social basis of a

transaction, while also serving as the basis for the many diversified

characteristics of customer value. Thus, managers need to keep in mind that

each co-creation of value has consequences both for the individual and the

community.

CONCLUSION

Value co-creation should be described as a synergetic interplay between

the levels of a service ecosystem, and this interplay can be better understood and

structured with self-organization theory. As Mittelstaedt, Kilbourne, and

Mittelstaedt (2006, p. 131) note: “[The] activities and actors of the marketplace

cannot be understood fully without also understanding the interdependence of

markets and marketing systems with other dimensions of civic life.” So, service

ecosystem research is based on phenomena at the intersection of marketing and

society. This requires recognition of emergent phenomena in service ecosystems

and their embeddedness, and of potentially unexpected social consequences

owing to the complex interplay of individual and collective phenomena. This is

the root of our unique contribution: By applying synergetics to questions of

value co-creation at both the societal public value (macro) level and the

individual customer value (micro) level, the proposed nine systemic principles

help to bridge the micro-macro gap (Domegan et al., 2012). Thus, value must be

viewed as a systemic property, and value co-creation must be regarded as an

organizing principle not only for service but also for society.


251

REFERENCES

Akaka, M. A., Vargo, S. L., & Schau, H. J. (2015). The context of experience.

Journal of Service Management, 26(2), 206-223.

Alexander, J. C., Giesen, B., Münch., R., & Smelser, N. J. (1987). The Micro-

Macro Link. Berkeley: University of California Press.

Baran, P. 1991. Werte, In H.-J. Sandkühler (Ed.), Europäische Enzyklopädie zu

Philosophie und Wissenschaften, Vol. 4: 805–815. Hamburg: Felix Meiner

Verlag.

Belz, C. & Bieger, T. (Eds.). 2004. Customer Value. Kundenvorteile schaffen

Unternehmensvorteile. Frankfurt am Main: Redline Wirtschaft.

Brodie, R. J., Hollebeek, L., Juric, B., and Ilic, A. 2011. Customer Engagement:

Conceptual Domain, Fundamental Propositions, and Implications for

Research. Journal of Service Research, 14 (3): 252–271.

Chandler, J.D., & Lusch, R. F. (2015). Service systems: A broadened

framework and research agenda on value propositions, engagement and

service experience. Journal of Service Research, 18 (1), 6-22.

Chandler, J. D. & Vargo, S.L. 2011. Contextualization and Value-in-context:

How Context Frames Exchange. Marketing Theory, 11(1): 35–49.

Cooper, C. 2012. Lessons from New Coke,

http://www.powerhomebiz.com/marketing-tips/branding/lessons-from-new-

coke.htm, accessed January, 12th 2014.

Corsaro, D. 2014. The emergent role of value representation in managing

business relationships. Industrial Marketing Management, 43 (6): 985-995.

Domegan, C., Haase, M., Harris, K., van den Heuvel, W.-J., Kelleher, C.,

Maglio, P. P., Meynhardt, T., Ordanini, A., & Peñaloza, L. 2012. Value,

values, symbols and outcomes. Marketing Theory, 12 (2): 207–211.


252

Dubow, J. S. & Childs, N. M. 1998. New coke, mixture perception, and the

flavor balance hypothesis. Journal of Business Research, 43 (3): 147–155.

Dworkin, R. 2011. Justice for hedgehogs. Cambridge, MA: Harvard University

Press.

Eagly, A. & Chaiken, S. 1993. Psychology of Attitudes. Fort Worth, TX:

Harcourt Brace Jovanovich College Publishers.

Ebeling, W. & Feistel, R. 1994. Chaos und Kosmos. Prinzipien der Evolution.


Edvardsson, B., Tronvoll, B., & Gruber T. 2011. Expanding understanding of

service exchange and value co-creation: a social construction approach.

Journal of the Academy of Marketing Science, 39(2): 327-339.

Etgar, M. 2008. A Descriptive Model of the Consumer Co-production Process.

Journal of the Academy of Marketing Science, 36(1): 97-108.

Festinger, L. 1957. A Theory of Cognitive Dissonance. Stanford: Stanford

University Press.

Frow, P. & Payne, A. 2011. A Stakeholder Perspective of the Value

Propositions Concept. European Journal of Marketing, 45 (1/2): 223–240.

Giddens, A. 1984. The Constitution of Society. Berkeley, CA: University of

California Press.

Granovetter, M. S. 1985. Economic Action and Social Structure. The Problem

of Embeddedness. American Journal of Sociology, 91: 481-510.

Grönroos, C. and Voima, P. 2013. Critical Service Logic: Making Sense of

Value Creation and Co-Creation. Journal of the Academy of Marketing

Science, 41 (2): 133-150.


253

Haase, M. and Pick, D. 2015. Value Creation in Sharing Networks: Towards a

Typology of Sharing Networks. In Bruhn, M. and Hadwich, K. (eds.).

Interaktive Wertschöpfung durch Dienstleistungen. Wiesbaden: Springer

Fachmedien: 439-468.

Haken, H. 1977. Synergetics: Nonequilibrium Phase Transition and Self-

Organization in Physics, Chemistry and Biology. Berlin, Heidelberg, New

York: Springer.

Haken, H. 1984. Can Synergetics Be of Use to Management Theory? Springer


Haken, H. 1993. Synergetics as a Strategy to Cope with Complex Systems.

Springer Series in Synergetics, 26: 5-11.

Haken, H. & Schiepek, G. 2005. Synergetik in der Psychologie:

Selbstorganisation verstehen und gestalten. Göttingen: Hogrefe.

Harrison, R., Newholm, T. & Shaw, D. (Eds.). 2005. The Ethical Consumer.

London: Sage.

Heyde, J. E. 1926. Wert. Eine philosophische Grundlegung. Erfurt: Verlag

Kurt Stenger.

Iwin, A. A. 1975. Grundlagen der Logik von Wertungen. Berlin: Akademie-

Verlag.

Jaakkola, Elina and Matthew Alexander (2014), “The Role of Customer

Engagement Behavior in Value Co-creation: A Service Ecosystem

Perspective,” Journal of Service Research, 17 (3), 247-261.

Johar, G. v., Maheswaran, D. & Peracchio, L.A. 2006. Mapping the Frontiers:

Theoretical Advances in Consumer Research on Memory, Affect, and

Persuasion. Journal of Consumer Research, 33 (1): 139–49.


254

Kjellberg, H. & Helgesson, C.-F. 2006. Multiple Versions of Markets:

Multiplicity and Performativity in Market Practice. Industrial Marketing

Management, 35 (7): 839–855.

Koos, S. 2012. What drives political consumption in Europe? A multi-level

analysis on individual characteristics, opportunity structures and

globalization. Acta Sociologica, 55 (1): 37–57.

Kotler, P. & Armstrong, A. 2010. Principles of Marketing. 13th ed. Upper

Saddle River, NJ: Pearson/Prentice Hall.

Laczniak, G. R. & Murphy, P. E. 2012. Stakeholder Theory and Marketing:

Moving from a Firm-Centric to a Societal Perspective. Journal of Public

Policy & Marketing, 31(2): 284-292.

Layton, R. 2011 Towards a Theory of Marketing Systems. European Journal

of Marketing, 45(1/2): 259-276.

Lusch, R. F. & Webster Jr., F. E. 2011. A Stakeholder-Unifying, Co-Creation

Philosophy for Marketing. Journal of Macromarketing, 31 (June): 129–34.

Lusch, R. F., & Vargo, S. L. (2006). Service-dominant logic: reactions,

reflections and refinements. Marketing Theory 6(3): 281-288.

Lusch, R. F., Vargo, S. L. & Tanniru, M. 2010.Service, value networks and

learning. Journal of the Academy of Marketing Science, 38 (1): 19–31.

Lusch, R. F. & Vargo, S. L. (2014): Service-Dominant Logic – Premises,

Perspectives, Possibilities, Cambridge: Cambridge University Press.

Maturana, H. & Varela, F. 1987. Tree of Knowledge: Biological Roots of

Human Understanding, Boston & London: Shambhala.

Meynhardt, T. & Stock, R. A. 2009. Customer Value und Public Value. Der

Kundennutzen im Bauch der Gesellschaft. Marketing Review St. Gallen, 1:

53–57.


255

Meynhardt, T. 2009. Public Value inside: What is public value creation?.

International Journal of Public Administration, 32 (3/4): 192–219.

Meynhardt, T. 2004. Wertwissen: Was Organisationen wirklich bewegt.

Münster: Waxmann.

Mittelstaedt, J. D., Kilbourne, W. E. & Mittelstaedt, R. A. 2006.

Macromarketing as Agorology: Macromarketing Theory and the Study of

the Agora. Journal of Macromarketing. 26 (December): 131-142.

Moore, M. & Khagram, S. 2004. On Creating Public Value. What Business

Might Learn from Government about Strategic Management. Harvard

Kennedy School Working Paper No. 3.

Payne, A., Storbacka, K. & Frow, P. 2008. Managing the Co-creation of Value.

Journal of the Academy of Marketing Science, 36(1): 83–96.

Pentland, B. T. 1999. Building process theory with narrative: From description

to explanation. Academy of Management Review, 24(4): 711–724.

Phillips, R. A. 2003. Stakeholder legitimacy. Business Ethics Quarterly, 13:

25–41.

Piller, F. T., Moeslein, K., & Stotko, Ch. M. 2004. “Does Mass Customization

Pay? An Economic Approach to Evaluate Customer Integration,”

Production Planning and Control, 15, 435-444.

Pires, G., D., A. and Rehman, M. 2014. Using Service Logic to Redefine

Exchange in Terms of Customer and Supplier Participation. Journal of

Business Research, 68 (5): 925-932.

Prahalad, C.K & Ramaswamy, V. 2004. Co-creation Experiences: The Next

Practice in Value Creation. Journal of Interactive Marketing, 18(3): 5–14.


256

Prothero, A., Dobscha, S., Freund, J. E,. Kilbourne, W., Luchs, M. G., Ozanne,

L. K. & Thøgersen, J. 2011. Sustainable Consumption: Opportunities for

Consumer Research and Public Policy, Journal of Public Policy &

Marketing, 30 (1), Spring: 31–38.

Rescher, N. 1969/1982. Introduction to Value Theory. Washington: University

Press of America.

Rosa, H. 2005. Beschleunigung – Die Veränderung der Zeitstrukturen in der

Moderne. Frankfurt am Main: Suhrkamp.

Schau, H. J., Muniz Jr., A. M. & Arnould, E. J. 2009. How Brand Community

Practices Create Value. Journal of Marketing, 73 (September): 30–51.

Stehr, N. 2007. Die Moralisierung der Märkte: Eine Gesellschaftstheorie.

Frankfurt am Main: Suhrkamp.

Tax, S. S., McCutcheon, D. & Wilkinson, I. F. 2013, “The Service Delivery

Network (SDN): A Customer-Centric Perspective of the Customer Journey,”

Journal of Service Research, 16 (November): 454-470.

Vargo, S. L. 2009. Toward a transcending conceptualization of relationship: a

service-dominant logic perspective. Journal of Business & Industrial

Marketing, 24 (5/6): 373-379.

Vargo, S. L. & Lusch, R. F. 2004. Evolving to a new dominant logic for

marketing. Journal of Marketing, 68(January): 1–17.

Vargo, S. L. & Lusch, R. F. 2006. Service-dominant logic: What It Is, What It Is

Not, What It Might Be. In R. F. Lusch & S. L. Vargo (Eds.) The Service-

Dominant Logic of Marketing: Dialog, Debate and Directions: 43–56.

M.E. Sharpe Inc.: Armonk.

Vargo, S. L. & Lusch, R. F. 2008. Service-dominant logic: Continuing the

evolution. Journal of the Academy of Marketing Science, 36(1): 1–10.


257

Vargo, S. L. and Lusch, R. F. 2009. Service-Dominant Logic – A Guiding

Framework for Inbound Marketing. Marketing Review St. Gallen, 6: 8–13.

Vargo, S. L., & Lusch, R. F. 2011. It's all B2B… and beyond: Toward a systems

perspective of the market. Industrial Marketing Management, 40(2), 181-

187.

Vargo, S. L., Lusch, R. F., Akaka, M. A., & Yi, H. 2010. The service-dominant

logic of marketing: a review and assessment. Review of Marketing

Research, 6: 125–167.

Vargo, S. L., & Lusch, R, F. 2015, Institutions and Axioms: An Extension and

Update of Service-dominant Logic Journal of the Academy of Marketing

Science, Forthcoming.

Walsh, J. P. 2005. Taking Stock of Stakeholder Management. Academy of

Management Review, 30(2): 426–452.

Weick, K. 1995. Sensemaking in Organizations. Beverly Hills: Sage.

Wilkie, W. L. & Moore, E. S. 2012. Expanding our understanding of marketing

in society. Journal of the Academy of Marketing Science, 40: 53–73.

Xie, C., Bagozzi, R. P. & Troye, S. V. 2008. Trying to Prosume: Toward a

Theory of Consumers as Co-creators of Value. Journal of the Academy of

Marketing Science, 36 (1), 109-122.

258

259

CURRICULUM VITAE

Theo Pepe Strathoff - [email protected]

PROFESSIONAL EXPERIENCE

University of St. Gallen, CLVS-HSG

Research Assistant & Fellow

St. Gallen, CH

2013-2016

Leuphana University

Visiting Lecturer

Lüneburg, GER

2014-2016

Bayer (China) Ltd.

Intern

Beijing, Shanghai, CHN

2011

Bayer AG

Intern

Leverkusen, GER

2011

Nothardt & Company GmbH

Intern

Stuttgart, GER

2010

Federal Ministry for Economics and Technology

Intern

Berlin, GER

2010

University of St. Gallen

Student Assistant

St. Gallen, CH

2008-2010

EDUCATION


PhD, Strategy & Management

St. Gallen, CH

2016

Harvard University

Innovation in Government Program Fellow

Cambridge (MA), USA

2015

London School of Economics and Political Science

M.Sc., International Political Economy

London, UK

2012


B.A., Business Administration

St. Gallen, CH

2011


B.A., International Relation

St. Gallen, CH

2010

Deutzer Gymnasium Schaurtestrasse

Abitur

Cologne, GER

2007

mailto:[email protected]

Strategic Perspectives on Public ValueFILE/... · 2016-09-20 · Strategic Perspectives on Public Value 16 PURPOSE This introductory chapter serves a threefold purpose: First, it

Documents