A Stakeholder Based View of Firm Growth: Stakeholder Orientation and Value Creation from Growth

Abstract

In this paper I adopt a stakeholder theory lens to understand why some firms are able to convert operations growth in value creating business even at high rates of growth, and others are not. Anecdotal and empirical evidence suggests that stakeholders possess knowledge, social capital, and resources relevant to sensing and seizing growth opportunities. Yet, we have little understanding of whether and how strategic orientation towards these stakeholders affects the firm’s ability to leverage these resources and create value from growth. I have two main findings. First, the relationship between operations growth rate and growth from value creation is inverse U shaped, so that the amount of value firms can create from operations growth in a given period is limited. The amount of value firms can create from growth depends amongst others on the extent to which they orient themselves towards their stakeholders, but this relationship is not linear.