High- vs. Low-Performance Configurations of Stakeholder Management and Innovation Strategies

Abstract

Why do some firms benefit more from managing for stakeholders than others? Under which conditions can stakeholder management actually diminish firm performance? In order to improve our knowledge about these important questions, we consider a firm’s stakeholder management in conjunction with its innovation strategies, which also allows us to resolve the recent puzzle whether stakeholder management and innovation are complements or substitutes. Distinguishing between external and internal stakeholders and exploratory and exploitative innovation, we argue that firms will achieve high performance when they align their stakeholder management and innovation strategies and poor performance when they misalign these strategies. Combined primary survey and time-lagged secondary data from 222 European firms, analyzed by means of fuzzy set qualitative comparative analysis, strongly support our theoretical argument. Our findings also indicate that stakeholder management and innovation are complements in some configurations and substitutes in others. We discuss the implications of our findings for the academic literature and management practice.