key: cord-0724247-w6klgy02
authors: Peerally, Jahan Ara; De Fuentes, Claudia; Santiago, Fernando; Zhao, Shasha
title: The sustainability of multinational enterprises' pandemic‐induced social innovation approaches
date: 2022-02-11
journal: Thunderbird International Business Review
DOI: 10.1002/tie.22256
sha: 7de0f32b45a870cd27107d9860e1fe5e9173ce71
doc_id: 724247
cord_uid: w6klgy02

The COVID‐19 pandemic has prompted an unprecedented reaction in several multinational enterprises (MNEs). These MNEs have adopted social innovation approaches to meet the needs of vulnerable societal groups by swiftly innovating their business models; drastically changing their product offerings and customer bases; and producing COVID‐19 necessities. These approaches have alleviated some key pandemic‐induced social challenges related to health and sanitation. In this perspective article, we use secondary sources of information to present and exemplify the various types of MNE pandemic‐induced social innovation approaches. We open the discussion on whether these approaches are transitory in nature or whether they can and should be sustained in the long‐term, given the right incentives to these MNEs. We conclude by redefining MNEs' social innovation and by suggesting avenues for scholars, practitioners, policymakers, and educators to support this momentum in MNEs which we argue, if sustainable, can be fruitful for addressing other pressing grand challenges such as climate change, food security, poverty, and inequality.

The various waves of the COVID-19 pandemic are poised to significantly impact diverse aspects related to multinational enterprises' (MNEs') operations, including those connected to the structure and functioning of global value chains (GVCs), and the viability of their business models for value creation. This prompts debates on the factors that determine the location of production and research and development (R&D) facilities (Hitt, Holmes, & Arregle, 2021) , and questions on the pertinence of purely economic considerations around efficiency and profit, as drivers of foreign direct investment (FDI). Moreover, the anticipated post-pandemic reorganization of GVCs creates uncertainty around the conditions for developing countries enterprises' ability to maintain or increase their participation in global trade and FDI flows, which will also impact their capacity to implement and achieve sustainable development goals (SDGs; UNCTAD, 2021).

Despite the above anticipated challenges that they face, enterprises themselves, including MNEs, are actively identifying, deploying and even sharing knowledge and experiences about workable solutions (UN Global Compact, 2021) to manage many of the social demands that emanate from this health and sanitary crisis, and to salvage economic activity through innovations. MNEs have even committed to funding access to COVID-19 vaccines (GAVI, 2020) , while governments on the other hand, have rolled out policy measures to contain the negative impacts on enterprises and on public health.

These initiatives illustrate the private sector's willingness to collaborate with governments and to adapt and reorient productive activities in times of crisis. Coincidentally, the pandemic is clobbering world economies and communities at a time when the discussion on MNEs, international business and their contributions to addressing grand challenges is gaining momentum (Buckley, Doh, & Benischke, 2017; Rygh, 2020; Zhao, Gooderham, Harzing, & Papanastassiou, 2021) .

The global COVID-19 pandemic has prompted an unprecedented reaction in several MNEs, even if exogenous shocks of differing natures are themselves not unprecedented. Since the start of the pandemic, several MNEs have swiftly innovated their business models and drastically altered their product offerings-made possible partly by frontier technologies-to cater to the needs of vulnerable societal groups who are not necessarily part of their regular customer bases.

Thus, MNEs have contributed to revamp production of necessities, that is, goods and services necessary for fighting COVID-19, including those for protecting healthcare workers [e.g., hand sanitizer and protective personal equipment (PPE) such as surgical masks, particulate respirators, medical gowns, goggles, surgical and examination gloves, and face shields] and those for saving lives (e.g., ventilators, vaccines) . Notable cases in the international media include Ford, 3 M, LVMH, Tesla, CAE, Pernod Ricard, Bauer, and others. Some of these MNEs have utilized digital technologies and smart manufacturing to rapidly respond to the new set of social demands created by this health and sanitary crisis (Dilyard, Zhao, & You, 2021) . Others such as LVMH, the brand owner of Louis Vuitton, recustomized its perfume line to produce hand sanitizer; or Foxconn, maker of Apple iPhones, switched part of its production to produce surgical masks (BBC, 2020) .

These distinct products are mostly directly targeted at vulnerable and at-risk populations-such as healthcare providers, patients especially the elderly and children and those with underlying health issues-which as per the social entrepreneurship and social innovation literatures, are viewed as beneficiaries of a social innovation (Westley & McGowan, 2017) . Indirectly, these products have a much larger impact on societies, since the basic social needs that they are attending to, if ignored can lead to complex social problems. Indeed, the spread of infectious diseases is exacerbated by poverty and inequality, which create conditions for diseases to thrive, and which in turn, interact with social-ecological systems to further promulgate poverty, inequity, and indignity (Salcito et al., 2014) . We have witnessed that globally, COVID-19 is spreading more rapidly in neighborhoods, cities, and countries where inequality is more prevalent; moreover, it disproportionally affects the poorer, disenfranchised populations (Alvi & Gupta, 2020; OECD, 2020; UNESCO, 2020) .

These MNEs' responses to the ongoing pandemic are evidence that they can play relevant roles as key societal actors in addressing global shocks and grand challenges. In the following sections, we describe the MNEs' pandemic-induced social innovation approaches, 1 and we exemplify them through the presentation of selected cases of their adapted or created products and services during the pandemic. Then, we discuss whether, how and why socially responsive business models should be sustained beyond the pandemic. Finally, we conclude by proposing a redefined understanding of MNE social innovation and by suggesting some future areas of research for scholars, as well as implications for practitioners, policymakers, and business school educators.

In this perspective article, we focus specifically on MNEs' pandemicinduced social innovation approaches, as both their reactions to exogenous shocks and their roles in global health (Ahen, 2019) have remained relatively understudied in the international business literature (Ahlstrom, Ciravegna, Michailova, & Oh, 2021) . Sparse international business research suggests that in the face of exogenous shocks for example, MNEs tend to react by either rationalizing or leveraging their cross-border activities, assets, and investments in ways which will maintain efficiency and reduce negative economic impact through exiting, divesting or maintaining/expanding the operations which are directly affected by the exogenous shocks (Chung, Lee, Beamish, Southam, & Nam, 2013; Dai, Eden, & Beamish, 2017; Li & Tallman, 2011; Oh & Oetzel, 2011 , 2017 . At the same time, MNEs can intensify corporate philanthropy (Mithani, 2017) in the most severely affected regions.

These reactions do not necessarily entail a drastic change in the MNEs' overall business models, product portfolios and customer bases, even if the latter two may differ across countries due to local adaptation needs. Indeed, with the COVID-19 pandemic, we have observed an impetus from MNEs to manage the global spread of this infectious disease, suggesting that the former has created unconventional incentives-beyond business opportunities-for MNEs to engage in social innovation across borders and which need to be better understood through scholarly discussions and research. In this article, we engage in the former and raise future research areas and questions for the latter.

Second, as the world attempts to redress itself from this exogenous shock, it will become necessary to reassess the common intervention practices and frameworks employed by different actorsespecially private sector ones such as MNEs. This is necessary for addressing some of the vulnerabilities which exacerbated the global effects of this crisis, and for helping to build cross-border resilience against future shocks (World Bank, 2020) . In effect, the United Nation's (UN) Sustainable Development Goals Report concludes that the pandemic has derailed progress on all 17 Sustainable Development Goals (SDGs), which had begun to slightly regress even before the outbreak of COVID-19 (UN, 2021) . Citing the 2030 Agenda for Sustainable Development, the report asserts that these setbacks urgently call for deliberate but bold action by "…Governments as well as parliaments, the UN system and other international institutions, local authorities, civil society, business, and the private sector, the scientific and academic community-and all people to reignite the SDGs and to unambiguously demonstrate our commitment to promoting economic growth with equity and social inclusion while protecting our environment" (United Nations, 2015, p. 52) . The report also underscores the pertinence of the private sector's leadership and the synergistic partnerships between various societal stakeholders as drivers of sustainable development initiatives (Stibbe & Prescot, 2020 

The link between MNEs, social value creation and grand challenges has been detailed in the literature review presented by Sinkovics and Archie-Acheampong (2020). They define social value creation as any positive societal or environmental outcome that arises from the activities of MNEs. Their literature review highlights the dominant view in the international business literature that MNEs' responses to grand challenges are intrinsically linked to factors such as competitiveness, reputation, stakeholder perceptions, and which affect their economic bottom lines, that is, profits.

While social value creation and social innovation by MNEs are not new phenomena (Kolk, Kourula, & Posani, 2017) , this unprecedented pandemic-induced reaction of said MNEs is new-perhaps a "transitory anomaly" geared toward achieving a competitive edge whilst addressing a social need-or perhaps it is indicative of another phenomenon altogether. A phenomenon that is outside the purview of what we currently understand social responsiveness by MNEs to entail. This phenomenon deserves, at the very least, to be discussed in different circles since the lessons derived from analyzing their responses to the pandemic by using social innovation tools, can be enduring for researchers, practitioners, policymakers, and educators.

From the MNEs' activities observed during the COVID-19 crisis, two broad types of social value creation approaches are identified.

The first is based on a traditional approach where the MNE meets the social needs of the pandemic through opportunities which are unrelated to its core business activities. This approach is in line with the corporate social responsibility view and is based, for example, on philanthropy. This is exemplified by Nestlé, whose response to specific country-level needs has been through a combination of food aids, The second approach is more radical in nature. It involves modifying the MNE's existing business model, and reconfiguring its core business practices and strategies, for example, by repurposing its production lines or adapting its services to meet the pandemic-induced social needs, and with a lesser emphasis on maintaining the economic bottom line. In Table 1 , we provide a list of selected MNEs that have adopted this radical approach toward creating positive societal outcomes during the COVID-19 pandemic. We classified the MNEs based on their adapted or created services during the pandemic and based on the level of complexity of their produced COVID-19 necessities as per L opez-G omez, Corsini, Leal-Ayala, and Fokeer (2020). The examples provided in Table 1 Agency, and the United States' Food and Drug Administration. These capabilities imply that the MNEs must be resource-rich and resourceful. They also imply a shift in business model which focuses on vulnerable societal groups and beneficiaries, rather than on the MNEs' usual customer bases. However, in some cases, the latter two may overlap.

Moreover, many of the innovative business models for creating social value during the pandemic have been made possible by the MNEs' frontier technologies, but also by combining the former with established readily available technologies and by the formation of novel partnerships with a broad set of systemic stakeholders.

The pandemic has prompted unprecedented efforts by MNEs to innovate business models for social value creation, which is a positive move toward addressing other grand challenges related, not just to health, but also to comprehensive sustainable development. Fostering private sector-led international initiatives could also speed progress T A B L E 1 Selected MNEs' radical approach to social innovation

• JD.com, the second largest Chinese online shopping platform after Alibaba's Taobao.com, employed drones to deliver goods, including food, to cities that were unreachable due to shutdown. • Sinopec, a Chinese petroleum and chemical MNE, sold vegetables and groceries in its network of gas stations to help both farmers and customers during the lockdown, and the slowdown of national transport systems. • Freshhema, Alibaba's fresh food retailer, due to the increasing demand in food delivery offered delivery service and created more than 5,000 deliverymen short-term jobs under the "sharing employees" initiative. It employed people who lost their jobs in catering firms, ride-sharing companies, shopping malls, hotels, and cinemas. • FedEx used its air shipping network to transport more than 450,000 protective suits and 7 million face masks, along with other critical healthcare supplies, to the United States. It planned to ship more than 500,000 suits per week in partnership with DuPont and to supply shipments of masks in partnership with healthcare supplies company Medline Industries. • Due to severe bottlenecks in screening and testing in the United Kingdom, GlaxoSmithKline, AstraZeneca, and the University of Cambridge formed a new diagnostic testing laboratory for COVID-19. The laboratory also explores the use of alternative chemical reagents for test kits to help overcome supply shortages.

Hand sanitizer • Honeywell temporarily shifted operations at two chemical manufacturing plants to produce hand sanitizer. Sites in Muskegon, Michigan, and Seelze, Germany, produced sanitizer over a few months for donation to the US Federal Emergency Management Agency and Germany's Saxony Ministry of Health, Social Affairs, and Equality. • SC Johnson in partnership with Dow, converted a line at its largest manufacturing facility in Wisconsin to produce 75,000 bottles of hand sanitizer per month, for donation to frontline and essential workers, including hospital staff, first responders and manufacturing employees. • Bacardi shifted operations at eight of its distilleries in the continental US, Puerto Rico, Mexico, France, England, Italy, and Scotland to make the ethanol needed to manufacture hand sanitizer. Factories producing Bacardi brands like Grey Goose vodka and Bombay gin provided enough ethanol for more than 260,000 gal of hand sanitizer for donation to communities in need, as well as first responders and essential workers.

• ZF Friedrichshafen, a German automotive supplier, bought out a small face mask company in China, transported the latter's machinery to its factories in Germany and produced 100,000 masks a day within 2 weeks. • Sinopec built up the world's largest mask material (melt-blown fabrics) production base during the first wave of the pandemic. • Eddie Bauer shifted portions of its production capacity to make N95 masks, surgical masks and face shields.

• Jockey repurposed its production lines to produce Tier 3 isolation gowns which went to high-priority medical facilities and testing sites across the United States. • LVMH repurposed its French and American workshops to produce nonsurgical protective masks.

• BYD, China's leading new energy vehicle manufacturer, shifted production to masks and became the world's largest mask maker shortly after the outbreak. • XinXing JiHua, the largest Chinese state-owned MNE manufacturer of military and police supplies, retooled its facilities and produced a daily output of more than 100,000 sets of PPEs in late February of 2020. • H&M began rearranging its supply chain to source and produce PPE for healthcare workers on the front lines. The first round of 100,000 face masks was delivered to Spanish and Italian hospitals. It also produced 1 million longsleeve, protective aprons for Swedish hospitals. • Ford repurposed production line in Plymouth, Michigan, and produced 3 million face shields. It also repurposed its transmission plant in collaboration with the United Auto Workers union (UAW), to produce face masks. It also worked with its supplier-Joyson Safety Systems-to manufacture reusable medical gowns from airbag materials. • General Motors (GM) converted its Warren, Michigan, facility to produce face masks in less than 7 days. The plant now has the capacity to churn out an estimated 1.5 million masks a month, and it shared the fast-turnaround production plans with the Michigan Manufacturers Association, made up of nearly 1,700 companies, to expand mask production across the state. • Japanese electronics giant, Sharp, adapted its existing clean-room production facilities for LCD display panels to make 150,000 surgical masks a day.

• Tencent developed a rapid artificial intelligence imaging and diagnosis solution for COVID-19 to replace doctors' examinations.

Clinical care equipment • ArcelorMittal joined forces with leading researchers and medical professionals in Spain to produce ventilators. Working in full coordination with the Minister of Innovation for the Asturias Region, Spain, the ventilators were produced using 3D printing and took 1 week to design. • Dyson repurposed its vacuum production lines to produce 10,000 ventilators. The discussions in this perspective article prompt us to reflect on the very essence of one of the first economic questions posed by Penrose (1959) Perhaps another more dramatic, even controversial, example relates to vaccines against COVID-19. Amidst the debate around proposed waivers on COVID-19 vaccines' patents, Goldberg (2021) argues that the removal of intellectual property protection would not solve the challenge of accelerating the global immunization efforts and that production capacity is also not the problem. Instead, she proposes that the MNEs' reluctance to produce the major COVID-19 vaccines and to scale up and mobilize their existing production capacities is due to the absence of pre-purchasing commitments backed by sufficient funding.

This discussion brings us to the misguided, deterministic and reductionist opposing views that MNEs should exist, first and T A B L E 1 (Continued)

assembled the respirators at Ford's plant in Michigan, using modified auto parts such as rechargeable batteries and fans from the Ford F-150. The plant has the capacity to produce 100,000 of these respirators or more. • With the help of Ferrari and its parent company Exor, Fiat Chrysler Automobiles produced key ventilator parts at its plant in northern Italy to help Siare Engineering answer the Italian government's call to triple its monthly production of ventilators to cope with hospital demand. • GM partnered with Ventec to retool its Kokomo, Indiana, plant to produce ventilators.

• GM's light-vehicle joint venture with SAIC, became the first auto manufacturer to build machines to produce face masks. • Protolabs, the world's fastest digital manufacturing service, which makes custom parts for prototyping and short-run production using advanced digital design and 3D printing technology, produced urgent products such as clips for attaching pediatric face masks, sheet metal components for automated COVID-19 laboratory test equipment, 25 different molds for ventilator production and 6 different prototype components for their low-cost ventilator in order to accelerate approval from the US Food and Drug Administration and speed up mass production.

Note: The selection presented in the table covers the range of different types of activities or changes in business models that MNEs have implemented. The table does not contain an exhaustive list of all the MNE cases encountered in the public domain as the exemplified activities or changes in business models become repetitive. Source: Based on authors' own elaboration of secondary information from the MNEs' websites and independent press, foreign press and state media coverage.

foremost, to make profits versus to bring benefits to society. A more 

In this article, we discussed some MNEs' social innovation approaches for rapidly addressing many of the social challenges associated with the pandemic. Some MNEs' have adopted a radical approach to social innovation during the COVID-19 pandemic that involved pivoting their business models and/or repurposing their production lines. This unprecedented approach highlights the MNEs' capacity and willingness to respond, on extremely short notice and amidst a global crisis, to grand challenges and attending to the needs of vulnerable societal groups and beneficiaries who are not necessarily part of their regular customer bases.

MNEs engage in social value creation as a means of sustaining their economic bottom lines while having social impact (Sinkovics & Archie-Acheampong, 2020) . In other words, doing good, is good for business.

The existing literature on MNE social value creation also tends to treat social innovations as being only associated with novel solutions (Holmström Lind, Kang, Ljung, & Forsgren, 2020) . We posit that the observed MNEs' responses to COVID-19 suggest otherwise.

The swift business model innovation and uptake of a social innovation approach by MNEs amid this pandemic imply a repurposing of their core activities to adjacent, sometimes even simpler activities, while for many the global markets for their usual products have stalled. 

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