Predicting stakeholder orientation in the multinational enterprise: A mid-range theory

Abstract

As the reach of corporations increasingly extends across borders, a key research question is whether overseas subsidiaries adopt a shareholder-centric orientation, centered on maximizing shareholder wealth, or a stakeholder-centric orientation, centered on creating value for a broader range of stakeholders. Existing theories, addressing the corporate level of analysis, focus on forces exogenous to the firm: local resource pressures, and institutional norms. Using a combination of induction and fuzzy-set analysis, I draw on documentary evidence and 298 interviews with managers and stakeholders to build theory about the conditions that shape subsidiaries’ stakeholder orientations. Two major findings emerge. First, although theory emphasizes external stakeholders’ control over resources, internal control through the corporate parent can crowd out the voices of local stakeholders. Second, although institutional theory proposes isomorphism with local norms and standards, some corporations are subject to scrutiny by global stakeholders, and their subsidiaries face higher requirements for social engagement than their peers. These findings are the foundation of a mid-range theory that combines conventional explanations, focused on environmental factors, and an internal-stakeholder perspective, based around the roles of the parent corporation as owner and resource provider, to predict stakeholder orientation.