The Dynamic Capability of Corporate Diplomacy

• Date: 01 August 2016
• Published date: 01 August 2016
• DOI: http://doi.org/10.1002/gsj.1121

THE DYNAMIC CAPABILITY OF

CORPORATE DIPLOMACY

WITOLD J. HENISZ

*

The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania, U.S.A.

Plain languagesummary: Corporate diplomacy is the ability to win the hearts and minds

of external stakeholders in support of an organizational mission. As compared to the

narrow support function of external affairs, corporate diplomats play a central role not

just in sensing risks and opportunities in the external environment, but also in shaping

short- and long-term strategic responses across all functions of their organizations.

Managers interested in creating long-term sustainable value for shareholders and soci-

ety—especiallyin emerging markets—needto enhance their skills as corporatediplomats.

Technical summary: Successin corporate diplomacy (i.e., theability to win the hearts and

minds of externalstakeholders) requiresa complex set of seemingly incompatibleroutines

and processes that together constitute a dynamic capability. The article draws

explicit parallels between the technological environment in which the theory of dynamic

capabilities was first developed and the stakeholder environment. Firms must sense

opportunities and threats that emanate from the external stakeholder environment across

multiple countries, sectors, and issue domains. In order to actually seizethese opportuni-

ties or avoid these threats, however, the organization must actually engage with stake-

holders in a manner perceived as genuine and caring and implement initiatives that

address their issues of concern. Such responses require short- and long-term strategic

change within the core of the organization. Copyright © 2016 Strategic Management

Society.

INTRODUCTION

Dynamic capabilities (i.e., the ability of an

organization and its management to integrate, build,

and reconfigure internal and external competences to

address rapidly changing environments) were

originally conceived by and studied in the domain of

technologymanagement. The sensing of opportunities

and threats in the external environment focused on the

arrival and evolution of new technologies inthat envi-

ronment that could in the hands of new entrants or

other innovators, destabilize the competitive

landscape. The mobilization of organizational

resources to deliver value and shape markets focused

on the technological resources and supporting

managerial routines within organizations that could

ensure the focal firm retained the ability to generate

rents even in the face of technological change. The

transformation to support a continuous process of

strategic renewal focused on strategies to manage

technological resources over time as waves of

technological change repeatedly transformed the

competitive landscape. As the scope of technologi-

cally based competition increasingly spans global

markets, scholars should expand the scope of this

inquiry to encompass a new broader set of

Keywords: stakeholder theory; dynamiccapability; political risk;

corporate socialresponsibility; external affairs; corporate affairs

*Correspondenceto: WitoldJ. Henisz, The WhartonSchool, Uni-

versity of Pennsylvania, 3107 Steinberg Hall-Dietrich Hall, 3620

Locust Walk, Philadelphia, PA ZIP, U.S.A. E-mail:

henisz@wharton.upenn.edu

Global Strategy Journal

Global StrategyJournal, 6:183–196 (2016)

Published onlinein Wiley Online Library (wileyonlinelibrary.com).DOI: 10.1002/gsj.1121

Copyright © 2016 Strategic Management Society