Ftima Guadamillas-Gmez et al. The integration of corporate social responsibility...

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Original scientific paper

UDC 65.012.412:17.026.1:001.11

The integration of corporate social responsibility

into the strategy of technology-intensive firms:
a case study*

Ftima Guadamillas-Gmez1, Mario J. Donate-Manzanares2,

Miha kerlavaj3

Abstract

This paper presents a new perspective which calls for an integration of ethics and
corporate social responsibility (CSR) into the company strategy as a source of
competitive advantages. The research question we pose is how a company can
successfully carry out this integration of CSR into its strategic management, for
which a model that includes three stages introduction, implementation and
generalization of CSR is presented. Based on an exploratory case study within a
Spanish technology-intensive firm (Indra), we show the way this company has
developed and implemented an explicit plan for the integration of ethical values
and CSR initiatives into its corporate and business strategies. Although this
company has established its own methodology in order to develop and implement
CSR plans, it fits in essence to our three-stage model of CSR integration. In
general, our analyses show a beneficial impact of the development and
implementation of CSR plan for this technology-intensive company. In particular,

*
Received: 29-07-2009; accepted: 12-05-2010
1
Associate Professor, University of Castilla-La Mancha, Faculty of Law and Social Sciences,
Department of Business Administration, Cobertizo San Pedro Mrtir, s/n 45071 Toledo,
Spain.. Scientific affiliation: knowledge management and organizational learning, innovation
management, and corporative social responsibility. Phone: +34 902 204 100 Ext. 5162. Fax:
+34 925 26 88 00. E-mail: fatima.guadamillas@uclm.es
2
Associate Professor, University of Castilla-La Mancha, Faculty of Law and Social Sciences,
Department of Business Administration, Ronda de Toledo, s/n 13071 Ciudad Real, Spain.
Scientific affiliation: strategic management, corporative social responsibility. Phone:
+34 926 295 300. Fax: +34 926 295 407. E-mail: mariojavier.donate@uclm.es
3
Assistant Professor, University of Ljubljana, Faculty of Economics, Department for Management
and Organization, Kardeljeva pload 17, 1000 Ljubljana, Slovenia. Scientific affiliation: modern
concepts of management and organization (learning and innovation networks, organizational
learning, organizational culture, knowledge management, learning organization). Phone: +386
1 5892 467. Fax: +386 1 5892 698. E-mail: miha.skerlavaj@ef.uni-lj.si. Personal website:
http://www.mihaskerlavaj.net, http://www.futureo.net. (Corresponding author)
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it seems that the CSR plan enables companies to improve its internal and external
(competitive) context through a better exploration and exploitation of knowledge,
its stable relationships with stakeholders and the development and improvement of
intangible resources such as reputation or social capital. It is also shown that
there are important factors to consider in order this process can successfully
carried out, such as organizational culture, human resource practices or
knowledge management systems. Future research will need to engage in larger-
scale confirmatory as well as longitudinal studies of the impact of CSR
implementation for company performance.
Key words: Corporate Social Responsibility, strategy, case study, Indra, Spain.
JEL classification: M1

1. Introduction
While interest in Corporate Social Responsibility (CSR) has historically received
a large amount of attention in the business administration field, the discussion
around this issue is nowadays gathering an exceptional significance, both in the
academic community as well as among the practitioners. Specifically, the strategic
management literature opens the question whether CSR may be a source of a
competitive advantage by differentiating products, processes or the firm itself from
its competitors (McWilliams and Siegel, 2001). Similarly, Porter and Kramer (2002)
point to the option that to taking into account CSR in corporate and business strategies
might be a way to outperform rival companies.
In addition, the concerns and objectives of the stakeholders are important aspects
to consider, in order to integrate CSR into business operations and activities of a
company. As Norris and ODwyer (2004: 174) assert, a new paradigm for business
is emerging, which accentuates firms responsibilities to several stakeholders in
addition to the oft revered shareholder (e.g., Freeman, 1984; Clarkson, 1995;
Donaldson and Preston, 1995; Mitchell, Agle and Wood, 1997; Friedman and Miles,
2002). Furthermore, the way the company applies their ethical principles and values
to its activities and how these are diffused and transfer thorough the organizational
network affects the relationships with all them - shareholders and other investors,
customers, suppliers, employees, or the wider community.
Overall, the application of CSR can lead to social benefits and legitimacy4 for the
firm, since it can consider itself as a coalition in which the different stakeholders
participate to gain their own benefit (Freeman, 1984). Owing to this, managers
progressively renounce the idea that CSR distracts them from their main objectives.

4
Legitimacy can be understood as the social justice through which an action is publicly validated; this
is to say that it is recognised that the firm possesses a distinctive competence to provide a product or
a service (Perrow, 1961). This is not an end in itself, but it can become a strategic resource with an
important economic and competitive potential for the company (Dacin, Oliver and Roy, 2007).
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Furthermore, they assume CSR as an essential part of the companys strategy. In

doing so, they introduce organisational changes to promote its development and
integration in business activities and processes (Donaldson and Preston, 1995).
The problem is that although recognition on the necessity to consider CSR as a
fundamental part of the firms strategic activities exists, there is still a lack of models
or frameworks that show the way CSR can be integrated in business and corporate
strategies on a permanent basis.
Therefore the integration of CSR into the firm strategy will be discussed, putting
forward a preliminary model through which firms could make this integration
possible to accomplish. This integration draws organizational problems concerning
culture, leadership, structure or the way that knowledge management can support
CSR practices in order they to be highly effective for the firm. To illustrate this issue,
a case study of a Spanish technology-intensive company Indra will be shown.
Besides the fact that technology is at the core of its business model, this company is
trying to integrate several ethical and CSR initiatives into its corporate and business
strategies with the aim of becoming a more innovative and responsible enterprise.
It aims to meet its stakeholders needs and expectations, using a structured plan that
seeks to establish concrete objectives, actions and assessments which permit it to
follow the advances and problems that arise in this process. The model used by this
company to make this plan possible to carry out is based on four main stages: the
establishment of CSR vision, diagnosis of CSR problems, CSR development plan,
and CSR communication plan.
Consequently, we aim to analyse the approach used by this company in order to
connect CSR initiatives with firms strategies, based on the idea that CSR integration
into strategy will lead the company to competitive advantages via the development
of intangible assets such as firms reputation, legitimacy and social capital
regarding stakeholders. Therefore, research question we ask is how a company
could successfully implement an integration of CSR into its strategy and how the
organization can put in practice this process having in mind certain important factors
to facilitate or, on the contrary, put at risk the success of this integration process.
An in-depth case study was used as qualitative research methodology in order to
analyse exploratory questions (Yin, 1994). Qualitative primary data was collected
through semi-structured interviews with corporate managers. We also collected
secondary data from other companys documents such as internal reports, the
companys website and other relevant information from financial and economic
press.
The structure of this paper is as follows. First, we analyse the integration of CSR
in the business management of a firm with the aim of establishing an overview of
this issue. Second, we conduct the case study of the integration of CSR in Indras
strategies. Finally, we conclude with some reflections and lessons extracted from the
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qualitative analysis, which show how the integration of ethics and CSR in business
management could be an opportunity of generating and sustaining the competitive
advantage of the firm.

2. Integration of Corporate Social Responsibility in business

management
From a strategic viewpoint and following Godfrey and Hatch (2007), literature
regarding CSR can be divided into two branches: (1) the ethical or moral orientation,
and (2) the business orientation. In its extreme form, the first approach suggests
that CSR is an act of reciprocity between the firm and its stakeholders (based on
the companys obligation towards them). As such, this morally oriented approach is
manifest, for example, in stakeholder theory.
In relation to the stakeholder approach, the selection of a CSR initiative depends
on the way the stakeholders perceive the problem and the need to resolve it, and
on a decision process which is based on a complex network of relationships among
internally and externally affected groups (Mitchell et al., 1997). Thus, some questions
with potentially different answers, such as establishing which stakeholders the firm
creates value added for or what benefits stakeholders are going to receive, are raised.
However, certain limitations exist, which organisations must not exceed, in relation
to dignity and human rights, work conditions or environmental respect (Werhane,
2008: 471).
On the contrary, the economic (business) approach suggests a positive relationship
between CSR practices and financial performance. Clearly this second perspective
provides a strategic anchor for CSR that can be rationally linked into and form a
part of company business strategy (Sharp and Zaitman, 2010). In this view, CSR
activities should be compatible with the objective of profit maximization, thus
contributing to obtaining the best long term economic performance (McWilliams,
Siegel and Wright, 2006).
Irrespective of one or another approach, both perspectives (ethical and economical)
give a rationale for the firm to integrate CSR into corporate and business strategy.
Sharp and Zaitman (2010) call this process strategization of CSR, which from a
strategy as practice approach (Whittington, 2006) it is an attempt to explain the
process by which CSR is strategized in an organization (i.e., the process by which a
strategy is integrated into organizational behavior and culture).
From this starting point, the question to deal with makes reference to the way the
company will carry out the strategization of CSR (Sharp and Zaitman, 2010). In other
words, how to institutionalize CSR in the firm, in line with its strategic objectives
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and internal characteristics. Although strategy can be viewed from a content or

process viewpoint (Whittington, 2006), we consider aspects from both perspectives.
Thus we take into consideration that institutionalization of CSR in firm management
implies the intended approach based on the elaboration of formal plans and also
the emergent approach, which implies the consideration of factors that affect the
way CSR plan is implemented and put in practice, such as knowledge management
systems, culture, leadership or human resource practices.
In our view, the integration of CSR into firm strategy could be established through
the development of the following stages:
(1) Introduction. In this stage, the fundamental issue is the transmission of ethical
principles and their integration into the culture which is shared by the organisational
members. This is not easy to accomplish, owing to the firm has to take into account
its strategic objectives which are influenced by the stakeholders needs, power and
legitimacy (Mitchell, Agle and Wood, 1997) and the managers ethical posture. From
this starting point, formal plans are elaborated in order to attain concrete goals. Also,
an effective communication plan is necessary to develop in order the employees
and other stakeholders have a clear perception that CSR is an aspect of strategic
importance for the company.
(2) Implementation of the CSR plan. In this stage certain factors come into play
when CSR formal plans are implemented, which are mainly related to HR practices,
capabilities development and certain changes in order to adapt the organisational
structure to the new situation, for which knowledge management systems and
organizational culture are essential aspects.
(3) Generalization of CSR. This is as an essential part of the CSR integration into
the company strategy. This is only possible to achieve if the previous stages have
been successfully overcome, and it implies a global change for the company, since
CSR will be incorporated into firms culture, mission and values. This third stage
is completed with reports in order to measure advances in CSR and benefits for the
stakeholders.
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Figure 1: Process of CSR integration into strategic management

Source: Authors

Following the three stages previously pointed out, Figure 1 shows that formal CSR
plans are established from the ethical posture of managers, the influence and power of
the stakeholders and the organisational strategic objectives. The next step corresponds
to the communication of these initiatives and objectives to the stakeholders
implicated and those affected by their consequences. In this point, to decide the
message to transmit and its unification with the different strategic initiatives is of
special importance, as the communicated information has an important influence
in the legitimacy and reputation of the firm. Thus, several documents are drawn up
to communicate the initiatives and later on, achievements are also communicated
in relation to all these aspects. Next, these actions are implemented resulting in
outcomes in environmental, economic and social ambits. These results have to be
assessed in order to justify the benefits (and costs) of the initiatives. The assessment
must be based on criteria related not only to financial or economic performance,
but also respecting generated and/or improved intangible resources, such as trust
or reputation (Surroca, Rib and Waddock, 2010). These assessments can be made
through audits, or other measurement indexes which are developed by independent
institutions5. In this process, establishing who (or whom) is going to be the main
person (or group of people) responsible for managing it is needed.

5
These institutions, such as the Global Reporting Initiative (GRI), are endeavouring to unify and
homogenise indicators in order to create a group of CSR and ethical measures which can be
universally adopted.
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Moreover, the process shown in figure 1 is a dynamic and cyclical process. Due to
changes in strategic objectives caused by CSR generalization, stakeholders needs
and their influence in corporate strategy may alter as well (Mitchell et al., 1997).
Also values, attitudes and priorities which shape the ethical posture of managers
evolve as a function of their experience and environmental changes, even if these are
maintained within certain limits. Thus, an ongoing learning process is carried out,
in which new knowledge is developed (Vera and Crossan, 2003), and this process
should help future decisions to be efficient, from economic and ethical points of view
(Argandoa, 2008). On the other hand, learning is a key matter for organisational
survival and performance (March, 1991). Due to the ethical values guide the
behaviour of employees and managers, we can appreciate that they are conditioned in
what they learn, which is of great importance for company performance and results.
In this framework, a main point is determined by the implementation of CSR plans on
aspects such as KM systems, organizational culture, leadership or human resources
(HR) practices. In general all these factors could be considered as propellants or, on
the contrary, as barriers to the CSR implementation if they do not fit among them or
are not aligned to the main company objectives and plans.
In general terms, culture can be understood as a set of rules, values and beliefs that
are shared by a firms members and which influences their behaviors, along with the
configuration of the firms image and identity in relation to its environment (Schein,
1985). This concept has been linked to implicit aspects, sometimes of an abstract
nature, such as ideologies, beliefs, basic assumptions of behavior or shared values,
although other more observable and explicit elements such as rules and organizational
practices, symbols, language, rituals, myths and ceremonies have also been included
as being related to culture (Alavi et al., 2005: 194). As beliefs and shared values
are at the core of organizational culture, it will act as a propellant, or instead as a
barrier, in relation to CSR plans implementation. If culture is rightly aligned to CSR,
it will be likely that these kinds of initiatives can be accepted and institutionalized
better than if they are not. Should this alignment happen, it is also very important
that a clear leadership exists in order to push employees towards goals achievement,
among which those of the stakeholders are included (Maak, 2007). On the other
hand, culture will be affected by changes that CSR practices (among which ethical
behaviors are included) introduce in the company. As Sims (2000: 65) asserts, an
accepted fact is that an organizations culture socializes people (Schein, 1985) and
that ethics (and a responsible behavior in relation to stakeholders) is an integral
part of the organizations culture. Therefore, organizations culture will affect the
way CSR is implemented in the company and will be affected by ethical and CSR
practices.
HR management is another important implementation aspect. It facilitates the
implementation of CSR can by providing the employees with the willingness, training
and motivation that are necessary to apply CSR actions and initiatives, which it in
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turn allows the firm to attain its strategic goals and objectives (Waring and Lewer,
2004). In doing so, HR practices are an important propellant for CSR along with
other organizational artifacts such as culture or technical systems (Kraft and Hage,
1990). Among these HR practices we can stand out, for example, the promotion
of learning and professional development through training, incentives, or ethical
initiatives such as non-discrimination (gender) programs and labour conciliation.
Finally, KM systems allow the firm to disseminate knowledge about CSR initiatives
in an effectively manner through the use of Information Technology (IT) tools and
other KM practices such as knowledge transfer, storage or application (Alavi and
Leidner, 2001). Moreover, knowledge on the stakeholders needs and preferences is
disseminated and ideas and new solutions can be developed through socialization,
internalization, externalization and combination processes (Nonaka and Takeuchi,
1995). In order to make these processes easier to develop the existence of common
environments is an essential aspect for the organization since it allows company
members to share experiences, information and ideas (Nonaka and Konno, 1998).

3. Case study: Indra

As it was previously pointed out, ethics and CSR are both questions which have
become of great significance for business management within the corporate milieu
as well as in an institutional and the academic sense. As a result of this, the most
competitive firms around the world have been developing a number of initiatives for
applying ethical and CSR principles and values to their decisions over the last few
years. Spanish companies are no exception and they are endeavouring to apply CSR
initiatives. In general terms, 50% of firms included in the IBEX-35 index (the main
Spanish share stock exchange index) provide a CSR Report and, as the EIU (2005)
report points out, 25% of firms included in the Global Fortune 500 develop this kind
of report too, with the main objective of highlighting their best practices in relation
to economic, environmental and social aspects.
In order to analyse CSR integration into the firms strategy we conducted an
exploratory case study of a Spanish technology-intensive company, Indra. This
technology-intensive firm has developed a specific plan to integrate ethical values
and CSR into its corporate and business activities and seems also successful as a
result of such positive engagement with their stakeholders and business context.
Our methodological framework consists of qualitative primary data collection
(using semi-structured interviews with two corporate managers). Primarily we used
open questions in order to encourage the manager to converse freely (Maykut and
Morehouse, 1994).We also collected secondary data from other companys documents
such as internal reports, companys website and other relevant information from
financial and economic press.
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3.1. Indra: Corporate Social Responsibility and innovation

Indra is a corporation which is a leader in Information Technology (IT) development
in Spain and it holds a strong competitive position in Latin America and Europe.
Its path of growth clearly responds to a related diversification through knowledge
on IT and developments in this area. In 2008, Indra achieved around about 2,380
million in sales6 and 182 million in net profit, had close to 24,806 employees7,
and developed projects in more than 100 countries. Shareholders structure is the
following: Caja Madrid (20%); Corporacin Financiera Alba (10%); Caja Grande
de Cartagena (5.68%); Cajastur (5%); Gas Natural (5%); and free-float (54.31%).
Having in mind that the Spanish economy is not a technology-advanced one in
comparison to other industrialised countries in Europe such as Germany or France,
the importance of counting on a knowledge-intensive multinational company is a
valuable aspect for the future development of the Spanish Economy, which should
change its growth pattern over the last decade it has basically been based on the
construction and tourism sectors in order to overcome those problems that the world
crisis has aggravated (e.g., a raise in unemployment rate and a drop in demand). In
2008, Indra invested 152 million in R&D, which represents a 6.4% on the total sales
income of the company8. This figure is much above average of R&D investments of
a typical Spanish company, which has accounted for 1.35% in the same year.
Indra develops solutions and high value-added services for industries such as
Security and Defence, Traffic and Transport, Energy, Financial Services, Health and
Public Administration, Telecom and Media. Overall, the IT industry, which Indra is
part of, has made advances in important organisational themes as compared to other
industries, such as the prominence of horizontal structures and self-managed work
teams. At the same time, knowledge creation, upon which the process of continuous
innovation in the company is based on, is a fundamental requirement to attain
competitive advantages in the market. For Indra, these aspects are all considered
as strategic and so form part of its business model, in which innovation stands
out as the main objective. On this basis, the way to the implementation of a social
responsibility plan has been carried out. The following subsection shows how this
fact has reinforced Indras strategic objectives attainment.

6
Following the National Statistics Institute (INE), this represents a 0.21% over the total GDP figure in
Spain, which was about 1,088,502 million in 2008.
7
This represents a 0.13% over the total of the Spanish employment figure (18,971,400 people).
8
Indra Annual Report (2008).
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Table 1: Indra factsheet

- mln EUR
Year
Average rate
Financial
2006 2007 2008 of growth (%)
categories and
2007-2008
employees
Equity 372.1 738.5 823.6 48.7
Sales incomes 1,406.8 2,167.6 2,379.6 30.0
Net profit 114.0 148.0 182.0 26.5
Number of Employees 14,478 23,482 24,806 30.8

Source: 2008 Indra Annual Report (2009)

3.1.1. Corporative Social Responsibility implementation in Indra

The implementation of a social responsibility model entails changes in the
organisational strategy. This implies counting on strategic and organisational factors
which will form part of this change. They must be related to one another and evolve
in a coherent manner. In addition to this, the implementation of a social responsibility
model, which evolves through four stages, was planned by Indra (Figure 2).

Figure 2. CSR implementation stages in Indra

Source: Adapted from Indra Annual Reports (2006; 2007; 2008; 2009)

From the study of the Annual and CSR Reports of the company, we consider that the
development of each stage has been carried out through a series of activities.

Stage 1: Vision
From the moment of the conception of corporate responsibility which is what
CSR should be Indra has prepared its own vision of the way managers consider
what its application in the company means (Indra Annual Reports, 2007; 2008):
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To be an innovative and knowledge intensive company in our relationships with

internal and external groups (shareholders, employees, customers, etc.) and with
other institutions which cultivate and develop knowledge, and communities in which
we operate.
Indra describes Corporative Responsibility as the honest behaviour of the firm in
relation to all groups with which it operates, in line with an idea of sustainable profit.
This should be understood in a three-fold way: economic, social and environmental
(Indra Annual Reports, 2006; 2007; 2008).
In this definition, the elements that the firm considers as essential in its CSR
are: innovation, knowledge, ethical values and corporate responsibility. Thus,
Indra maintains that its main CSR objective is its consolidation as an innovative
and knowledge intensive company which offers value to all groups interested:
shareholders, employees, communities in which it develops its activities, customers,
suppliers, and society, in general terms. According to this vision, Indras established
values are: customer satisfaction, excellence, human capital development, integrity,
innovation and profitability.

Stage 2: Diagnosis
From the corporate mission and its recognized values, an array of CSR initiatives
was established. However, to do this, it was necessary to make a previous diagnosis
on the corporate situation in relation to Indras different stakeholders.
This diagnosis was made through interviews with top and middle managers, and
Union representatives. Also, discussion groups with employees9 were created,
using several documents regarding data on customers, suppliers, firm partners,
and information from financial markets. Jointly, all this information was used to
establish the diagnosis of Indras situation in relation to CSR, which was reflected
in the Corporate Social Responsibility Report. This document is made up of two
main components: (1) Indras stakeholder map, and (2) CSR objectives of Indras
performance regarding these groups. The former involves shareholders, employees,
customers, suppliers, knowledge institutions, local communities, and environment.
And the latter has to do with (a) relationships framework (with these groups), and (b)
to be an innovative company (in relation to these groups).
Counting on this methodology, the company tries to attain knowledge of high strategic
value with the aim of achieving a number of innovations, because it establishes
who its main stakeholders are and their necessities, motivations and aspirations.
From all of this, it selects priority areas of CSR management, those that could be

9
The company calls them focus groups, and up to 40 employees participate in each.
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improved upon and those in which it could reach a leadership position because of the
application of its knowledge base (for example, satisfying new customers needs).

Stage 3: The Management Plan

Knowledge obtained from the diagnosis stage allows them to establish a Corporate
Responsibility Management Plan, which is used as the axis to develop all the
activities that have been pointed out. This is a document in which the advances
of the firm in knowledge management and corporative responsibility is planned, in
relation to three variables: relationships with stakeholders, knowledge management
especially the exchange with external groups , and innovations obtained from
these relationships.
This plan includes some objectives which try to ensure that CSR becomes an
important strength for the company (Indra, 2007): (1) to promote a responsible
culture among all the groups, and especially employees, with the aim that they get
involved in social responsibility initiatives; (2) to create an adequate framework
to transform CSR into a development engine for innovation and knowledge and
aligning it with the strategic objectives of the company; (3) to develop the CSR
Report following the Global Reporting Initiative (GRI) directives, trying to ensure
that it becomes a sustainability report, soliciting an external evaluation from an
independent institution.
The development of this plan permits the assessment of current activities with
stakeholders, along with the establishment of standards to reinforce these
relationships, the improvement of indicators of the attained objectives, the periods
fulfilment, the performance of individuals in charge and the assumed economic and
social risks.
These objectives are followed up by classifying them into specific documents
according to the main stakeholders, which detail the person(s) in charge to manage
them, actions to be developed, and indicators to assess the fulfilment of each one.

Stage 4: Communication Plan

With this plan, the company tries to disseminate all the social responsibility activities
and the achievements which have been obtained. The fact that all groups are aware
of these aspects contributes to their active implication in them and helps to promote
the responsible culture of the company and reinforces its image as a firm committed
to all the stakeholders interests. Among the initiatives carried out with this aim in
mind, the following stand out (Indra Annual Report, 2009): (1) CSR reports for
2005, 2006, 2007 and 2008; (2) detailed information on the companys web; (3)
articles in different general and specialized publications and conferences in several
congresses and forums; and (4) interviews, conferences, meetings, presentations and
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making contacts with some important institutions in the ambit of ethics and social
responsibility.

3.1.2. Specific actions of CSR in Indra

Basically extracted from the Indra Annual and CSR Reports and interviews with
managers, we explain detailed CSR objectives and actions developed for each of
the Indras stakeholder groups: customers, suppliers, employees, shareholders and
community.

Customers
For Indra, knowledge exchange with customers to develop ad-hoc solutions is
essential. In doing so, Indra selects those customers that it considers as highly
innovative and with great growth potential, for which the development of trust (based
on cooperation agreements) is critical. Thus, Indra establishes strategic alliances
to share knowledge that is needed to develop products and solutions adapted to
customers needs, developed from Indras own technologies and solutions.
With this group, the company is carrying out other KM initiatives, such as the
commercial observatory or the creation of some extranets in which information
and data are exchanged with them. Thus, it fulfils a two-fold aim: it improves its
knowledge on needs and expectations of this group, and intensifies the relationships
through the existence of fluid communication and links.

Suppliers
In relation to suppliers, the company maintains stable agreements for the development
of certain technologies, the results of which reverberate in aspects such as training
and performance assessment. One of the initiatives carried out is the survey of
suppliers, through which it obtains valuable knowledge that allows it to improve
its own supply management. In relation to this, one of the immediate objectives
of the firms corporate responsibility is the improvement of this survey to enhance
communication with this group.

Employees
In relation to employees, Indra has implemented an Employees Code of Conduct
to try to instil the main principles of its culture, concerning ethics and knowledge
generation and transfer. In doing so, it promotes and spreads training, the creation of
trust and development of talent. The key objective is that employees are motivated
using incentives such as their participation in work teams, and that through such
initiatives they are stimulated into making worthy contributions.
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Thus, Indra counts on a Performance Assessment and Internal Search for Talent
program, which it applies twice a year. It contains three main activities: the General
Development Plan, which is used to manage employees talent; the investment in
actions to identify employees potential; and plans to identify successors in critical
working places. This allows Indra to establish remuneration systems by results and
to reward employees with the highest potential, on a contribution basis in relation
to the different KM activities. Also, small work groups are established in which the
transfer of tacit knowledge is promoted.
On the other hand, the employees selection policy and individual evaluation system
are very rigorous, in order to assure a high qualification level and better professional
development careers, avoid overstaffing and maintain a high flexibility level. With
the same objective, Indra often subcontracts the manufacturing of some products
and services to small-sized companies, and sometimes employees from these are
contracted by Indra on a talent and professional potential basis.
In the next few years, more ambitious goals regarding social responsibility will be
raised in relation to employees, such as diversity policies, labour insertion actions
for the disabled, the Equilibra program which tries to conciliate the employees
private and working life, the promotion of actions which favour flexibility such as
tele-work, and the development of an equality plan. Moreover, some actions are being
implemented to promote the active participation in KM, such as discussion forums.

Shareholders
In relation to shareholders, Indra tries to protect their interest in corporate
government decisions. Thus, Indra has promoted information transparency and the
implementation of best practices of corporate government, which are included in the
Olivencia Code, the Aldama Report and the Conthe Code10.
Nowadays, the company is endeavouring to develop forms to try to improve the
information that shareholders receive. Moreover, Indra is considering the possibility
of entering in some sustainability indexes, which would reinforce its image as
responsible company and would facilitate the obtaining of funds for the company.

Communities: Social Action Plan

Indras initiatives to improve its relationships with knowledge institutions and local
communities are included in the social action plan. One of the more important actions
in this Plan was the creation of a network of special employment and development
centres in 2004. These are located in different places, sometimes far from big

10
These are reports on good corporate government practices in Spain. Indra has been awarded the
prize for being the best company included in the IBEX 35 index in relation to practices in Corporate
Government and information transparency (FEF and Recoletos prizes).
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industrial areas but near to universities or training centres where the company trains
and employs highly qualified personnel. In the next few years, Indra intends to
increase the number of these centres.
In relation to knowledge institutions, actions are oriented towards diffusing knowledge
and innovation. Thus, the social responsibility programs and its collaboration with
nearly 40 universities and research centres stand out with the aim of jointly developing
projects to share and diffuse knowledge.
Indra also includes as a part of the Social Action Plan stable working relationships
with non-lucrative institutions, with the aim of creating shared value between the
company and the community. As a result, Indra does not limit itself to donating
funds or carrying out marketing activities but instead offers them equipment and
expertise on a permanent basis. Moreover, Indra considers some of these entities
as knowledge partners11, because they are experts who contribute with external
knowledge on highly diverse but relevant aspects for its strategy such as market
tendencies, environmental themes, legal frameworks or the needs of the disabled. In
doing so, relationships are generated which benefit the company because they allow
Indra to gain access to key knowledge about the environment. Partners also benefit
because they can count on knowledge and company resources to improve the living
conditions of individuals so that they can be fully integrated into society. All current
and future initiatives on social responsibility are included in the Management Plan.
In relation to the initiatives included in Table 2, which were extracted from Indras
Management Plan, two aspects stand out as being remarkable because they clearly
show Indras evolution in this matter. The first one refers to the establishment of
objectives. Thus, in the two years period from 2005 to 2007, the objectives were
sometimes unspecific, establishing declarations of intention (e.g., relationships
improvements). Later on, however, they are addressed (future initiatives) in a much
more specific way (surveys, agreements, environmental certifications, etc.).

11
Some of these partners are CEFAES, Integra and the Realiza Foundation (at Spain). The most recent
agreement has been signed with the ONCE Foundation, Spain. It is based on the development of joint
technological projects, with the aim of helping the full integration of disabled persons into society
(Indra Annual Report, 2006).
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Table 2: Objectives, actions and future initiatives in Indras Management Plan

Group Objectives Actions Future
2005 - 2008 2005 - 2008 initiatives
employees Relationships framework Working environment Diversity: new
improvement survey recruitment
KM improvement KM initiatives: forums Equality plan
Innovation in human Diversity policy Conciliation
resources management Equilibra: working KM initiatives
conciliation program New ways of working
Telework
Third Sector Relationships framework Signing of the Inserta Indra Foundation
(social action) agreement Technologies for disabled
Social Action Policy persons
Corporate volunteers
Environment Integral Environmental Integral Environmental Environmental
policy policy certification in all centres
Certification of two work
centres
Shareholders Socially responsible Communication study with To appear in sustainability
investment shareholders indexes
Customers Relationships framework KM initiatives: commercial KM initiatives: extranets
improvement observatory
Suppliers Relationships framework Principles in the relationships Improvement of survey
improvement framework with suppliers of suppliers
Survey of suppliers
Knowledge Formal framework of Coordination of Intensification of
Institutions relationships relationships with relationships with
universities universities
Local Impulse to collaborate in Establishment of TDC expansion
Communities the Social Action Plan technological development
centres (TDC)
Corporate To promote Indras role Global Compact Signature Counsellor assigned to the
area as a corporate citizen Corporate responsibility CSR follow-up
committee Behaviour Code updating
Corporate evaluation system Revision and correction
Documents of of the risks map
communication To normalise the CSR
Check of CSR Report system in terms of the
SG21 agreement
To improve
communication with
stakeholders

Source: Authors (based on Indra 2006, 2007 and 2008 Annual and CSR Reports).
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This shows that as soon as the stage of cultural dissemination of these initiatives
has been overcome, Indra starts to integrate CSR into the strategic plans of the
organisation in a practical manner. In this sense, the progress experienced by the
corporate area is remarkable, in relation to certain issues: (1) To place CSR actions
at the same level as the key strategic decisions (e.g., control at executive board
level); (2) efforts to establish and validate some progress indicators (e.g., report
monitoring, adoption of the SG21 system12, etc.). All efforts are carried out with the
aim of spreading the results among all stakeholders, defending progress in social
and environmental matters from both an ethical and economic perspectives. The
second issue corresponds to the importance given, in the two stages of the plan and
even more so in the latter to KM initiatives, especially in relation to employees.
This shows KM as a basis for innovation and social responsibility within the firm.
Moreover, this implies that CSR and KM are complementary and strategic aspects,
which jointly contribute to improving the competitive position of the company.

3.2. Implementation factors in Indra

A key aspect to consider in the integration of CSR into strategic decisions of the
company is the way some organizational aspects should be coherent in order to make
the implementation process for the firm easier. Thus in this section we highlight
the role of the most important factors in this process: culture and leadership, HR
practices and the role of the companys knowledge management that is directly
related to culture and HR management.

Culture and leadership

Indras corporate culture is a key success factor owing to the importance it attaches
to establishing the general framework of relationships between the company and its
stakeholders, and its influence on other organisational aspects. In our opinion, the
most important cultural aspects for the integration of ethics and CSR into strategy
and innovation management are the following:

To create and disseminate a culture and a leadership that promotes knowledge

creation and the innovation around ethical and social values of responsibility
The corporate culture stimulates the consideration of ethics and CSR as two basic
aspects of its strategy, but linked to its position as a company which is knowledge
and innovation intensive. Other essential cultural aspects are its shared vision, the
commitment to common projects (strategic alliances), work in teams, autonomy
in decision making, tolerance of mistakes which are implicit in innovation, shared

12
SG21 is a standardised system of ethical management in Spain.
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learning and ethical values. In order to disseminate these principles and values
certain initiatives stand out such as institutional declarations about the mission and
the firms values, the elaboration of ethical codes and formative actions on social
responsibility themes.

To identify and promote knowledge for innovation in its relationship with all
stakeholders
Indra considers the creation of knowledge to be a key element of its strategy and a
fundamental responsibility, in order to generate technologies and solutions which
provide value to the stakeholders, especially customers, suppliers and communities in
which this company operates. Also, established relationships with these stakeholders
offer Indra knowledge about the markets evolution.
Due to this, the strengthening of the firms participation in agreements and alliances
with stakeholders and its ethical performance in these is very important. This allows
Indra to learn best practices, identify their needs and reinforce relationships with
them.
The spreading of a culture which promotes trust, participation and support from an
enthusiastic leadership is an aspect which explains a great part of the achievements
in the ethics area. The case study shows that results obtained in the innovation, KM
and CSR ambits strongly depend on the degree in which organisational members
adopt the cultural values on which these processes rely.

To integrate CSR as a key aspect of the strategy.

CSR is not held to be a philanthropic question alone by Indra i.e. only related
to external relationships and far from the core of vital decisions but it focuses
in the improvement of strategic and management aspects. Thus, the company, by
maintaining of fluid communication with the stakeholders, acquires a relevant
knowledge on their needs, which allows Indra to drive its innovative efforts in the
correct (strategic) direction.
All of this implies that the implementation of ethical principles for the organisation
as a whole is taken into consideration. To make this possible, these principles and
values must be included in the strategic plans, to be disseminated and promoted, and
to ensure that a follow-up of attained advances is carried out through some indicators
which are included in the social responsibility or sustainability reports. On this point,
Indras initiative of developing the CSR Management Plan stands out. This allows
Indra to disseminate the advances obtained in the CSR implementation to all the
stakeholders.
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HR practices
Employees are essential to Indras CSR and the development of innovations. This
influence is produced in a positive sense for example, when the firms CSR fits in
with their values or in a negative sense when employees do not work according
to ethical criterions, or a climate of excessive pressure is created solely to achieve
performance in terms of profitability or efficiency.
Moreover, employees actively participate in the CSR programs and assume ethical
values as an essential part of their work only when they have a high level of motivation.
This helps Indra to achieve its CSR objectives. Also, their active participation in the
innovation process is indispensable, as they posses skills, abilities, creativity and
tacit knowledge of high strategic value, all which they have to be willing to share
and to apply to their work. Likewise, each employee must individually assume part
of the responsibility for his/her learning and performance, although the organisation
must facilitate his/her training and professional development.
Among the CSR practices which Indra develops in relation to employees in order to
satisfy their objectives (as a stakeholder) and motivate them in their work are: (1)
systems to promote learning and professional development; (2) fixed and variable
incentives in relation to achieving results; (3) active participation in some of the
companys decisions, relating to specialization and the way that decisions affect
their objectives; (4) systems which promote fluid communication among employees
and other stakeholders regarding the strategic objectives, activities and company
results (the initiatives range from formal documents, e.g., strategic plans or conduct
codes, to meetings which promote informal communication); (5) equal opportunity
programs, non-discrimination and labour conciliation, based on mutual respect for
the rights of the individuals and which allow the better qualified and more motivated
employees to occupy the most suitable position in the firm.
A prominent initiative is the organisation of work in multidisciplinary teams,
which facilitates knowledge exchange, even that of a tacit nature. When teams
are self-managed or when they have a high level of autonomy to take decisions
regarding objectives and processes to achieve them, they themselves become an
important factor for motivation, because they reinforce participation, autonomy and
consensus concerning objectives and methods. This allows employees to actively
involve themselves in the creation, acquisition and transfer of knowledge in which
innovation is based. Teams also contribute to the dissemination of cultural values of
innovation, ethics and CSR, and in doing so meet with Indras essential objectives.
All this implies an improvement in the working environment and the reduction of
conflicts jointly with the cost that these imply.
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4. Discussion and implications

In this paper, we have tried to highlight the way Indra is carrying out the integration
of CSR into its corporate and competitive strategies, following a process which
basically includes four main stages: CSR vision establishment, CSR problems
diagnosis, CSR development plan and CSR communication. Although this is a
specific process for Indra, we can categorise it in our general three stages model of
introduction-implementation-generalization. In the introduction phase, Indra starts
by considering some factors related to the strategic objectives, its ethical posture and
the starting point regarding CSR in the firm (vision establishment and diagnosis).
Once the CSR plan has been formulated and the communication plan designed, the
implementation phase starts and factors such us culture, KM and HR practices come
into play. From the case study, we can point out that the right management of all these
aspects has been essential for this firm to take advantage of CSR in relation to its
core strategic resource knowledge, and its main activity technology development.
In addition, this process is considered by Indra as an essential aspect leaving behind
the consideration of the company as simply a financial profit seeker, and in doing
so, Indra gets the consideration of a responsible company for suppliers, customers,
employees, shareholders and in general, the society. Therefore, for this company,
business activities have both social and managerial sense, making social responsibility
compatible with the search of economic profits (Steiner and Steiner, 2000; Porter and
Kramer, 2006).
It is important to remark that the integration of ethics and CSR for Indra is not a casual
process with some dispersed initiatives but a more formalised, deliberate course of
actions in which indicators and ex-post controls have had an important role in its
implementation. As knowledge and innovation are the focus of Indra businesses, the
link between corporate strategy and CSR has been centred in the leveraging of its
knowledge base that is basically related to the employees talent and the exploration
of other stakeholders needs, which allow the company to find out new opportunities
in highly dynamic competitive environments.
Moreover, the consideration of Indra as a social responsible company reinforces its
position in relation to external stakeholders such as suppliers, potential partners,
clients, public administration and, in general, the society. From a resource-based
perspective, reputation is an asset that it is built on a long-term basis, but the effort can
be worth because it can be valuable and difficult to imitate by competitors (Barney,
1991; McWilliams et al., 2006). As we have seen in the evolution of the main figures
of the company, financial performance has been growing and the managers still wait
for positives figures in the next future.
As implications for managers of technology-intensive companies, we can highlight
that although the advantages of CSR integration into corporate and business strategies
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seem to be important, this integration will be only possible to achieve if there is a

clear purpose by managers in order to place CSR at the heart of their businesses. In
this sense, one of the main lessons that we can extract from the case study is that
the establishment of a formal plan that follows an introduction (vision, diagnosis)-
implementation (management plan)-generalisation (communication) methodology
has been very useful for Indra in order to take advantage of this integration. Moreover,
other aspects have to be considered in this process, such as actions that propel a culture
in which knowledge management has to be linked to social values of responsibility;
the promotion of trust, participation and support among employees for which an
enthusiastic leadership is an essential factor; or the development of HR practices that
promote a (ethical) positive sense for employees for example, when the firms CSR
fits in with their values or on the contrary, to avoid a (ethical) negative sense for
example, when employees do not work according to ethical criterions. Among these
practices, Indra has used incentives, multidisciplinary teams or programs such as
equal opportunity, non-discrimination and labour conciliation, all which has allowed
the company the better qualified and more motivated employees to occupy the most
suitable position in the firm in order to talent can be effectively exploited.
As the case study has shown, it should be pointed out that the most innovative firms
which are managed by ethical leaders have an opportunity of ensuring that social
responsibility and ethical principles are implemented in a coherent manner and, in
doing so, contribute to the attainment of economic efficiency, confidence and culture
identification. As a direct result of this, these aspects turn into knowledge and
innovation propellants and thus, they form part of the basis of a firms competitive
advantage. In doing so, the company has been able to exploit ethically its knowledge
base, for which the management of the stakeholders needs and requirements has
been (and will be) an essential issue.
Implications can be extended to other industries and sectors, even those for which
innovation is not the main competitive (success) factor. In these industries, the
integration of CSR into the company strategy is also possible to carry out, and
advantages of this integration will also arise in terms of reputation, legitimacy and
improvement of the competitive context (McWilliams et al., 2006). On the other hand,
on a firm-level basis, firms strategy will influence the decisions in the development
of CSR actions. For instance, following the well-known Porter (1985) classification
of the two basic ways for firms to compete, differentiation or cost leadership, the
pursuit of a differentiation strategy creates more possibilities for socially responsible
behavior, as Jones (1999) asserts. Hence, the differentiation approach is based on
adding value rather on minimizing cost, and this opens up space for firms to purchase
inputs on the basis of quality rather than price, nurture employees as a source of
value-added rather than a expense, and contain environmental externalities as a basis
for positive differentiation in the market to customers who value social responsibility
(Jones, 1999: 169).
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Certainly, the investments in CSR activities can imply short-term performance

reduction, because managers typically have to incur in certain expenses to attend
the necessities of stakeholders, but it will be on the long-term where the effects on
long-term shareholders returns will be shown, as some empirical studies have found
(e.g. Ogden and Watson, 1999; Garca-Castro et al., 2008). And beyond the financial
performance, many firm managers have ethical concerns and a deep commitment
with communities in which the company develops its activities. In this sense, the
case study shows a way in which CSR can be integrated into a firms strategy
through the use of a specific methodology based on formal plans and the attention to
organizational factors such as culture and knowledge management.

5. Conclusions
The main contribution of this paper is the exploratory description of a technology-
intensive case study where ethical principles and CSR are implemented in companys
strategy. In turn, positive relationships with stakeholders seem to contribute to
generation and sustainability of a competitive advantage for the company. This is
achieved by means of the improvement of its competitive context, which highly
depends on its (ethical) relationships with stakeholders. In this sense, this company,
through the integration of CSR into its strategic activities is achieving high
performance levels both in social (non-financial) and financial terms. Although it
is difficult to directly link CSR actions to financial results, it seems that Indras
competitive context is allowing the attainment of strategic objectives by means of
the development of new markets, sales growth in actual markets and the launching of
new products and services. Hence, this paper demonstrates a best practice case study
of the development and implementation of CSR plan.
Naturally, this study also has its limitations. First and utmost, the nature of the study is
exploratory and descriptive. This means that causal-inferential relationships between
CSR actions and firm performance are difficult to establish. Its main advantage is the
depth of observation instead of width of generalization possibilities. Second, certain
restrictions exist in relation to the study of these issues (ethical aspects, intangible
resources) which are in essence difficult to measure. We also acknowledge the fact
that we had an outsider view mainly reported through the lens of managers and
secondary data. Third, the cross-sectional nature of the study makes it difficult
to extract unequivocal conclusions on the effects of the CSR application on firm
performance, while it is highly probable that effect of CSR on performance becomes
evident with a time-lag.
Future research should react to these limitations in several ways. First, after building
a conceptual set of factors and causal links between construct in consideration, a
quantitative confirmatory analyses will be needed. Such studies in different context
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(countries, sectors, etc.) will allow for more generalization in terms of results obtained.
Second, beside top-down approach of data collection, future researchers would also
need to investigate bottom-up perspective of the followers (in order to check for fit in
managerial-employee or other stakeholder perspective). Third, longitudinal studies will
contribute to the clarification of the time-lag issue related to CSR plan implementation
(cause) and firm performance (consequence) effect.

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Integracija drutveno odgovornog poslovanja u strategiju tehnoloki

intenzivnih poduzea: poslovni sluaj
Ftima Guadamillas-Gmez1, Mario J. Donate-Manzanares2, Miha kerlavaj3

Saetak

U radu je predstavljena nova perspektiva koja integraciju etikog i drutveno

odgovornog poslovanja u strategiju poduzea smatra izvorom konkurentskih
prednosti. Postavljeno je istraivako pitanje koje nastoji utvrditi na koji nain
poduzee moe uspjeno provesti integraciju drutveno-odgovornog poslovanja u
strateki menadment i u tu svrhu predstavljen je model koji ukljuuje tri faze:
uvod, implementaciju i generalizaciju drutveno-odgovornog poslovanja. Na
temelju eksplorativne analize sluaja procesa stratekog oblikovanja unutar
tehnoloko intenzivnog poduzea u panjolskoj (Indra), prikazan je eksplicitan
plan integracije etikih vrijednosti i inicijativa drutveno odgovornog poslovanja
u njegovu korporativnu i pripadajue poslovne strategije. Iako je ovo poduzee
uspostavilo svoju metodologiju za provoenje i razvoj planova drutveno-
odgovornog poslovanja, ono se u biti uklapa u na model integracije u tri faze.
Openito, provedene analize prikazuju pozitivan utjecaj razvoja i implementacije
plana drutveno odgovornog poslovanja na promatrano tehnoloko intenzivno
poduzee. Posebice, ini se kako plan drutveno odgovornog poslovanja, kroz
bolje istraivanje i iskoritavanje znanja te kroz postojanje stabilnih odnosa s
interesno-utjecajnim skupinama, omoguava poduzeima unaprjeenje njihovog
unutarnjeg i vanjskog (konkurentskog) okruenja. Kako bi se to potvrdilo, u
budunosti su potrebna opsenija konfirmativna, ali i longitudinalna istraivanja
utjecaja implementacije drutveno odgovornog poslovanja na uspjenost
poduzea.
Kljune rijei: drutveno-odgovorno poslovanje, strategija, Indra, panjolska
JEL klasifikacija: M1

1
Izvanredna profesorica, Sveuilite u Castilli-La Manchi, Fakultet pravnih i drutvenih
znanosti, Katedra za poslovno upravljanje, Cobertizo San Pedro Mrtir, s/n 45071
Toledo, panjolska. Znanstveni interes: menadment znanja i organizacijsko uenje,
menadment inovacija, drutvena odgovornost poduzea. Tel.: +34 902 204 100 Ext. 5162.
Fax: +34 925 268 800. E-mail: fatima.guadamillas@uclm.es
2
Izvanredni professor, Sveuilite u Castilli-La Manchi, Fakultet pravnih i drutvenih
znanosti, Katedra za poslovno upravljanje, Ronda de Toledo, s/n 13071 Ciudad Real,
panjolska. Znanstveni interes: strateki menadment, drutvena odgovornost poduzea.
Tel.: +34 926 295 300. Fax: +34 926 295 407. E-mail: mariojavier.donate@uclm.es
3
Docent, Sveuilite u Ljubljani, Ekonomski fakultet, Katedra za menadment i organizaciju,
1000 Ljubljana, Slovenija. Znanstveni interes: moderni koncepti menadmenta i organizacije
(mree uenja i inoviranja, organizacijsko uenje, organizacijska kultura, menadment znanja,
uea organizacija). Tel.: +386 1 589 2467. Fax: +386 1 589 2698. E-mail: miha.skerlavaj@
ef.uni-lj.si. Osobna web stranica: http://www.mihaskerlavaj.net. (Kontakt osoba)