Managing for Stakeholders Can Pay Off in the Long-term

Managing for Stakeholders Can Pay Off in the Long-Term

Pam Laughland July 27, 2010
The authors apply a stakeholder management lens to the recurring question: why do some firms have higher financial performance than others? Researchers examine how a company’s approach to stakeholder relationships can lead to competitive advantage. They focus on 1) how managing for stakeholders can give firms more knowledge about their stakeholders preferences, and 2) how this knowledge can translate into additional value.

Background

All firms have stakeholders—employees, managers, customers, suppliers, owners—but the amount of time, energy and money firms devote to them varies. While research suggests investing to keep stakeholders happy may help the bottom line, it is difficult to justify extra effort or resources without knowing the benefits. In this paper, the authors examine how and when investing in stakeholders can pay off in the long-term.

Findings

Implications for Managers

Implications for Researchers

This paper leaves testing of the reasons for the relationship between managing for stakeholders and competitive advantage to future work. Researchers should examine which factors make stakeholders reveal their preferences, and identify new methods for measuring the value created.

Methods

The authors explain how and why managing for stakeholders can create value by examining the literature on firm competitiveness and performance and stakeholder management. While the authors draw on a few empirical studies to help explain the relationship, their reasoning is not tested in this article, indicating a need for future research.
Harrison, Jeffrey S., Douglas A. Bosse and Robert A. Phillips. (2010) Managing for stakeholders, stakeholder utility functions, and competitive advantage. Strategic Management Journal, 31:58-74. 

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