Non-market Stakeholders Research Articles

Value exchanges within stakeholder networks throughout a megaproject's lifecycle

Megaprojects are complex projects with huge investments and numerous stakeholders. Megaproject value is created by networks of multiple stakeholders conducting value exchange, which refers to the processes involved in satisfying stakeholders’ various needs reciprocally. To understand this intricate dance, by integrating the new stakeholder theory (NST) into the stakeholder value network (SVN) concept, this study proposes a theoretical framework of megaproject stakeholder value network (MSVN) to unravel the underlying processes driving reciprocal value exchange and explore how they change throughout the megaproject lifecycle. Moreover, this study adopts an exploratory sequential mixed-methods design to develop a novel network approach to qualitatively and quantitatively analyze MSVN and identify the critical value exchanges for value creation. An empirical investigation was undertaken on Chinese transportation megaprojects. The results indicate that owners and market stakeholders (especially designers) create the most value in the implementation phase, while the collaboration between owners and nonmarket stakeholders (especially governmental bodies) delivers the most value during the front-end and operation stages. Of the six categorized value flow types identified, communication/evaluation is the most significant for the front-end and operation phases. At the same time, support/opportunity comes to the fore in the implementation phase. These findings shed new light on the value exchange process of megaprojects and guide stakeholders engaged in value creation.

The Power(lessness) of Flexibility in Public–Private Partnerships: Two Capital Projects From the National Capital Region

This article draws on the new stakeholder theory to examine the role of flexibility in the decision process within capital-intensive public–private partnerships (PPPs). It highlights that successful PPPs rely on the project sponsor’s ability to effectively utilize market stakeholders’ critical resources (i.e., information and expertise) to maximize economic value creation, and to gain nonmarket stakeholders’ critical resources (i.e., support) through equitable social value identification and distribution. Drawing on two case studies in the national capital region of the United States, this article proposes a theoretical view to understand flexibility and stakeholder management for capital-intensive PPPs.

Move Fast and Break Things? The Contingent Nature of Product Acceleration in Nascent Markets

Acceleration allows firms to lock in early success upon entering a nascent market, but whether it enables firms to sustain competitive advantage after the entry is unclear. Using a granular data set on the U.S. LED lightbulb market 2010–2017, we apply an abductive approach to examine the relationship between postentry product acceleration and market acceptance. We find that, although acceleration is slightly more beneficial for firms that have accumulated greater pioneering experience, incumbents with more recognizable brands are able to achieve even greater market acceptance by slowing down their product iterations. Meanwhile, deceleration seems to be a better strategy among firms striving to build legitimacy via regulatory engagement, whereas acceleration could be more beneficial for firms competing in subproduct markets with greater technological uncertainties. We contribute to the nascent market literature by showing that the extent to which firms gain market acceptance through postentry product acceleration hinges on their abilities to assess, learn from, and shape both market and nonmarket stakeholders. Funding: This research is supported by grants from the Innovation, Entrepreneurship, and Technology Research Grant provided by Cornell University’s Johnson College of Business and Daigle Labs at the University of Connecticut, School of Business. Supplemental Material: The online appendices are available at https://doi.org/10.1287/stsc.2023.0192 .

Humanising complex projects through design thinking and its effects

The last decades of research in project studies show us that humans, rather than technologies, software or mathematical models, shape project success. This is simultaneously fascinating and problematic since, while technologies, software or mathematical models are relatively predictable and straightforward, humans are far more complex, with extremely intricate links between motivations and emotions. This consideration is particularly true in complex projects where a plethora of diverse stakeholders have very different emotions and motivations toward the same project. To address this challenge, this essay proposes using design thinking principles, tools, and techniques to "humanise" complex projects. By bringing together stakeholders, including non-market stakeholders such as local communities, with diverse goals and interests and aligning them with a common purpose, design thinking can help to shape, plan, and deliver successful complex projects. While design thinking is commonly discussed in innovation studies, this essay aims to encourage its investigation and discussion in project studies.

The Role of Stakeholder Heterogeneity in the Corporate Social Responsibility – Corporate Financial Performance Relationship

Empirical evidence on the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) remains contentious in terms of both its direction and causality. The presented study explores the intervening roles of stakeholder heterogeneity and the time dimension in the CSR–CFP relationship. We posit that there is a positive relationship between CSR activities towards market stakeholders (employees, customers, competitors) and future CFP and a negative relationship between CSR activities towards non-market stakeholders (NGOs, society, natural environment) and future CFP. A conceptual model is analysed using a sample of 115 Croatian companies. Countering expectations, a positive relationship is observed for all stakeholder groups considered (market and non-market), showing that CSR is a coherent construct regardless of the stakeholder group being studied. The key managerial implication is that socially responsible action is also in a company's economic interest.

Stakeholder Environmental Concerns and Adoption of Green SCM Practices: Role of Stakeholder Characteristics

Literature has widely recognized the influence of stakeholder pressures on the development and deployment of green supply chain management (GSCM) practices. However, how firms perceive and prioritize environmental demands of different groups of stakeholders is not clear yet. This paper posits that not all stakeholder environmental concerns are equally important to firms; rather stakeholders' characteristics will be a main factor to determine the extent of attention allocated by firm to satisfy the environmental demands of a specific segment of stakeholders compared to others. It also argues that not all stakeholder environmental concerns are considered as antecedents to adoption of GSCM, rather characteristics of specific groups of stakeholders and their level of market-power play a key role in determining antecedent–consequent relations of stakeholder’s environmental concerns to the implementation of GSCM. This theoretical belief was confirmed in this study using structural equation modelling of data collected through a survey of 138 Omani manufacturing firms. Results of this study revealed that effect of market stakeholders pressure on firms’ willingness to adopt both internal and external types of GSCM is stronger than effect of non-market stakeholders pressure, and that environmental demands of market stakeholders is considered as antecedents to GSCM implementation while environmental concerns of non-market stakeholders is considered consequence in this process.

How Much is Enough? A Contingent Perspective on Slack and Joint Value Production in Megaprojects

This study develops a contingent perspective on the relationship between financial slack and joint value production in megaprojects. We hold constant the essence of a governance arrangement by which decision rights over the use of the project resources are shared to encourage cooperation from nonmarket stakeholders. To mitigate the reputational costs of a budget overrun, the project is endowed with unallocated funds. We propose the slack is beneficial, but only up to a point. Hence, up to a lower threshold, more slack enables to increase both the project economic value as well as the social gains to be appropriated by the stakeholders. Above this point, more slack diminishes the project value produced jointly, but not the total value co-produced in that a further increase in social gains outweighs a loss in project value. Yet, above an upper threshold, more slack gets superfluous because it has no effect on the balance between continuing to cooperate vs. reneging on the commitment to cooperate. Further, we examine how the slack thresholds vary in function of the stakeholders’ bargaining power and the perceived value of the social gains. We review the logic of our arguments by examining the role of contingencies in sustaining non-hierarchical groups set up to plan a railway for the UK, and conclude by connecting to other explanations of megaproject behavior.

Synergy or Antagonism? How Corporate Political and Social Strategies Influence Firm Innovation

Although the increasing research interest on non-market strategy, the relationship between non-market strategy and firm innovation as well as the combinative impact of engagement in CPA and CSR are not well researched or understood. In this study, we integrate institutional perspective and multi-stakeholder perspective to analyze how the CPA and CSR independently and interdependently affect a firm’s innovation performance. With 3938 firm-year observations of China’s A-shared listed private firms between 2014 and 2018, we find support for the predictions that CPA strategy and CSR strategy both can exert a positive effect on firm innovation performance. We further develop competing hypotheses for the interactive effect of CPA and CSR on firm innovation from synergistic versus antagonistic view, and the findings are consistent with the antagonistic view. This study not only enriches our knowledge regarding the independent and joint influence of non-market strategies on firm innovation performance, but also highlights the necessary to pay attention to the heterogeneity of non-market stakeholders when integrating non-market political and social strategies.

Why Do Some Multinational Firms Respond Better Than Others to the Hostility of Host Governments? Proximal Embedding and the Side Effects of Local Partnerships

AbstractUsing a multiple‐case study of alleged expropriations reported before the World Bank, we examine how multinational companies (MNC) react to the escalating hostility of host governments. Our study reveals how different choices regarding the interaction with local nonmarket stakeholders – which we refer to as proximal vs. mediated embedding – shape how managers respond to these disputes by affecting their ability to collect, process and interpret information, and to act upon it in a way that effectively mobilizes local and international support. In contrast to the prevailing view that local partners in international joint ventures shelter MNCs from abuse from political authorities, our findings show that primary reliance on local partners to manage the local nonmarket environment can actually reinforce a liability of outsidership and even create a ‘liability of insidership’, to the extent that relying on local partners prevents the MNC from establishing quality connections with a broad range of nonmarket stakeholders, reducing its alertness and responsiveness to hostile acts from host governments.

Engaging informal institutions through corporate political activity: Capabilities for subnational embeddedness in emerging economies

This study examines how multinational enterprises (MNEs) organize internally to enhance subnational institutional fit in new frontier developing economies. We consider how corporate political activity (CPA) can facilitate local embeddedness by engaging informal institutions and nonmarket stakeholders at local community level. We apply an exploratory, qualitative, multi-case study approach to six MNEs in Uganda’s electricity generation sector. The findings suggest that in markets like Uganda, MNEs depend on being bridged with subnational informal institutions such as tribal, social, and religious norms and grassroots political networks. Such bridging in turn positions these MNEs to contribute to developmental processes by integrating recognizable informal institutions into grassroots projects.Drawing on institutional theory and an organizational capabilities perspective, we identify the diverse bridging capabilities that enable MNEs to successfully embed locally, thereby simultaneously pursuing business objectives and achieving societal relevance.

Incidence of Activist Actions on Politically Connected Companies: Examining a ‘Cost’ of Connection

Despite both politicians and activists residing in the non-market sphere, research at their interface has been scarce. Our understanding of the dynamics of the firm’s relationship with these non-market stakeholders is inadequate. This study partly addresses this void by arguing that the presence of board political connections (BPC) results in the firm being preferred as a target by activists. Two mechanisms are suggested: i. association with politicians imposes higher normative expectations on the firm, resulting in it being held more accountable for violations, ii. violations by such firms generate higher media interest, thereby drawing the attention of other activists – resulting in the lowering of the costs of mobilization, as well as the risks of reprisal for the activist(s) involved the action(s). For empirical analysis, I utilize, among others, a novel dataset covering activist actions from the years 2010 to 2016. I restricted my analysis to firms located in the US and employed a variety of identification techniques to alleviate endogeneity concerns. The results reveal that politically connected firms are more likely to receive activist actions and face greater number of actions. Moreover, actions on such firms are likely to elicit harsher criticism from activists and also generate higher media coverage.

Addressing supplier sustainability misconducts: response strategies to nonmarket stakeholder contentions

PurposeFirms are increasingly accountable for their suppliers' social and environmental practices. Nonmarket stakeholders nowadays do not hesitate to confront buying firms for their suppliers' misconducts by mobilizing demonstrations, social media campaigns and boycotts. This paper aims to develop a typology of response strategies by targeted firms when they face such contentions and to empirically investigate why these strategies vary among those firms.Design/methodology/approachDrawing on social movement and stakeholder salience theories, the authors develop a set of hypotheses linking their typology of four response strategies to three key contextual factors – nonmarket stakeholder salience, nonmarket stakeholder ideology and the target firm reputation – and examine them using a vignette-based experiment methodology.FindingsThe results suggest that nonmarket stakeholder salience significantly impacts the nature of response (reject or concede), whereas the nonmarket stakeholder ideology is significantly related to the intensity of response (trivial or vigorous). Interestingly, the firms' reputation was found to have no significant effect on their response strategy when they faced stakeholder contentions.Originality/valueThis paper adds both theoretical and methodological value to the existing literature. Theoretically, the study develops and tests a comprehensive typology of response strategies to nonmarket stakeholder contentions. Methodologically, this study is original in leveraging a vignette-based experiment that allows establishing causal factors of response strategies following a supplier sustainability misconduct.

Contracting Beyond the Market

Despite growing engagements between firms and non-market stakeholders — such as local communities and nongovernmental organizations — research has yet to examine the emergence of formal contracts between them. Given that a very large number of such contracts are theoretically possible but only a small number exist, we seek to understand what factors explain the use of contracts to govern some relationships between firms and non-market stakeholders but not others. We draw on transaction cost economics (TCE) to study transactions wherein a non-market stakeholder provides a firm access to a valuable resource and to understand when these transactions are governed by formal contracts. We propose that, when a firm makes site-specific investments, a stakeholder’s use rights to the resource sought by the firm, the negative externalities generated by its use, and the stakeholder’s capacity for collective mobilization, increase holdup risk for the firm and therefore the probability of a contract. We collect novel data on the location of indigenous communities and mines in Canada to identify a plausible exhaustive set of indigenous communities “at risk” of signing a contract with a mining firm. We test our hypotheses by relying, respectively, on historically assigned property rights over lands, the mine-community co location in a watershed and proximity on transportation routes, and archival records of community mobilization events. We find support for our propositions by examining which of the 5,342 dyads formed by 459 indigenous communities and 98 firms signed 259 contracts between 1999 and 2013.

Contracting Beyond the Market

Despite growing engagements between firms and nonmarket stakeholders—such as local communities and nongovernmental organizations —research has yet to examine the emergence of formal contracts between them. Given that a very large number of such contracts are theoretically possible but only a small number exist, we seek to understand what factors explain the use of contracts to govern some relationships between firms and nonmarket stakeholders but not others. We draw on transaction cost economics to study transactions wherein a nonmarket stakeholder provides a firm access to a valuable resource and to understand when these transactions are governed by formal contracts. We propose that, when a firm makes site-specific investments, a stakeholder’s use rights to the resource sought by the firm, the negative externalities generated by its use, and the stakeholder’s capacity for collective mobilization increase holdup risk for the firm and therefore the probability of a contract. We collect novel data on the location of indigenous communities and mines in Canada to identify a plausible exhaustive set of indigenous communities “at risk” of signing a contract with a mining firm. We test our hypotheses by relying, respectively, on historically assigned property rights over lands, the mine-community colocation in a watershed and proximity on transportation routes, and archival records of community mobilization events. We find support for our propositions by examining which of the 5,342 dyads formed by 459 indigenous communities and 98 firms signed 259 contracts between 1999 and 2013.

The Implications of COVID‐19 for Nonmarket Strategy Research

Abstract The COVID-19 virus ignited social and economic turmoil around the world Not since the Spanish Flu of 1918 had we seen a pandemic of such scale and severity The resultant global transformation of industries, supply chains, work, communication, and institutional frameworks suggests we are entering a period of non-ergodic change, in which the future cannot be extrapolated from the past (North, 1999) This means that we do not know the probability distribution or the outcomes from the virus So, we must find a way to coexist and build our resilience

Navigating imposed innovation: A decision-making framework

Modern economies are characterized by the rising role of nonmarket actors (e.g., regulatory agencies, social activists, labor unions, media) that are gaining influence over the behavior of for-profit firms. These nonmarket stakeholders use their clout over industry players to impose innovations that require costly changes in business practices or technological trajectories while lacking firm-level economic justification. How should a company respond when it is pressured to adopt a new practice or change its products, while the economic calculations suggest that this is going to be a pure cost? Our study suggests alternative strategic responses to imposed innovation pressures and explores the factors determining the choice of an optimal strategy. Grounding the argument on the outside-in approach to pursuing imposed innovations, we propose a framework of organizational responses to external pressures to innovate, with varying degrees of firm engagement and different levels of cooperation with other industry actors. We also present a decision tree approach, allowing organizational decision makers to analyze the contextual determinants and ultimately arrive at the most appropriate, context-determined strategy.

Contracting Beyond the Market: Contractual Agreements between Firms and Nonmarket Stakeholders

Contracting Beyond the Market: Contractual Agreements between Firms and Nonmarket Stakeholders

Strategic responses to imposed innovation projects: The case of carbon capture and storage in the Alberta oil sands industry

Today's ‘activist’ attitudes and strong power of non-market stakeholders (such as government agencies, non-governmental organizations, labor unions) have triggered the phenomenon of imposed innovation projects. These are investment projects carried out by profit-seeking firms primarily in response to the demands of influential non-market stakeholders. Such projects are supposedly instrumental to the emergence of new, socially beneficial products and production processes. We use a stakeholder management perspective to analyze the case study of a set of salient imposed innovation projects in the realm of carbon capture and storage (CCS) technology, pursued in the 2011–2014 period by a number of energy companies in Western Canada. We describe the peculiarities of these projects and reveal the scope and drivers of firm-level actions in response to the pressure to pursue imposed innovations. The findings reveal a spectrum of strategic responses to imposed innovation pressures, with varying degrees of cooperation with other economic actors, and varying levels of engagement to tailor the imposed innovation to the firm's technological profile. We develop a set of propositions on the performance implications for firms implementing imposed innovation projects. The paper concludes with recommendations for policy makers concerned with the improved diffusion and effectiveness of such projects.

Blacklisted Businesses

This paper explores whether and how social activists’ challenges affect politicians’ willingness to associate with targeted firms. We study the effect of public protest on corporate political activity using a unique database that allows us to analyze empirically the impact of social movement boycotts on three proxies for associations with political stakeholders: the proportion of campaign contributions that are rejected, the number of times a firm is invited to give testimony in congressional hearings, and the number of government procurement contracts awarded to a firm. We show that boycotts lead to significant increases in the proportion of refunded contributions, as well as decreases in invited congressional appearances and awarded government contracts. These results highlight the importance of considering how a firm’s sociopolitical environment shapes the receptivity of critical non-market stakeholders. We supplement this analysis by drawing from social movement theory to extrapolate and test three key mechanisms that moderate the extent to which activists’ challenges effectively disrupt corporate political activity: the media attention a boycott attracts, the political salience of the contested issue, and the status of the targeted firm.

Institutional Drivers for Corporate Social Responsibility in an Emerging Economy: A Mixed-Method Study of Chinese Business Executives

This study develops an internal–external institutional framework that explains why firms act in socially responsible ways in the emerging country context of China. Utilizing a mixed method of in-depth interviews and a survey study of 225 Chinese firms, the author found that internal institutional factors, including ethical corporate culture and top management commitment, and external institutional factors, including globalization pressure, political embeddedness, and normative social pressure, will affect the likelihood of firms to act in socially responsible ways. In particular, implicit ethical corporate culture plays a key role in predicting different aspects of corporate social responsibility (CSR), while external institutional mechanisms mainly predict market-oriented CSR initiatives. This study contributes to the research on CSR antecedents by showing that in the emerging economy of China, CSR toward nonmarket stakeholders is more closely intertwined with corporate tradition and values, while legitimacy-seeking CSR activities are still limitedly rewarded.