Abstract
AbstractResearch summaryResearch documents the performance effects of attending to shareholders and treating employees well but underplays national differences in the relative power of labor and capital. We advance a configurational perspective that acknowledges the fit between stakeholder engagement, context, firm attributes and performance. As a cornerstone of this perspective, we develop a typology of stakeholder engagement strategies expressing how firms navigate the tension between conforming with local expectations—by prioritizing shareholders or employees, according to context—and being distinctive—by diverging from their peers. Analyzing a cross‐national sample of firms from 2004 to 2011, we identify combinations of engagement strategies, firm attributes, and contexts linked to high performance. Our findings highlight the multiple context‐dependent paths, which link stakeholder engagement to high firm performance.Managerial summaryHow do firms navigate pressures from shareholders and employees across different institutional environments? We develop a typology of stakeholder engagement strategies based on how firms in different countries strike a balance between conformity (i.e., prioritizing locally important stakeholders) and differentiation (i.e., prioritizing stakeholders that their local peers might neglect). Our findings show that the engagement strategies associated with high performance vary according to local institutional context and firm characteristics. In particular, by not merely prioritizing stakeholders who are already locally important, firms can use stakeholder engagement to differentiate themselves from their peers, and such engagement strategies are often linked to high performance.
Highlights
Institutions—“the rules of the game in a society or....the humanly devised constraints that shape human interaction” (North, 1990, p. 3)—both constrain and empower actors and activities (Scott, 2001)
Managerial summary: How do firms navigate pressures from shareholders and employees across different institutional environments? We develop a typology of stakeholder engagement strategies based on how firms in different countries strike a balance between conformity
The primary contribution of this study is to advance a configurational perspective on stakeholder engagement
Summary
Institutions—“the rules of the game in a society or....the humanly devised constraints that shape human interaction” (North, 1990, p. 3)—both constrain and empower actors and activities (Scott, 2001). In market-driven institutional systems, firms are reliant on equity financing and have access to flexible labor markets, and the state enshrines firms' fiduciary duty to their shareholders in law. Firms rely on longterm bank-based financing, provide greater employment security for their employees, and the state restricts employers' rights to unilaterally change employment terms. These cross-national differences in labor relations and the working of capital markets shape firms' relationships with their shareholders and employees (Coates, 2005; Hall & Soskice, 2001; Witt & Jackson, 2016).
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