Secondary Stakeholders Research Articles

A new approach for joint venture stakeholder analysis: the impact of a parent company's organisational dimensions on its project risk profile

The joint venture (JV) form of business organisation has become a critical part of corporate strategy in worldwide markets, but its high failure rate presents a great challenge to potential investors. Using an inductive case study method, the authors explored the question of how the organisational structure of JV parent companies impacts the joint venture project’s risk profile. We found that there can be sub-units or individuals within an organisation whose goals are incongruent with the goals of the parent companies and their joint venture projects who can act against the JV project without consequence due to organisational injustice and agency issues. These sub-units can create risks and uncertainties and undermine cooperation and trust between the parent companies in the joint venture project. To increase the likelihood of success of future JV projects, the authors combined organisation, stakeholder, and agency theories to propose a conception framework in which parent companies were defined as the primary stakeholders and their functional departments as the secondary stakeholders. The JV project team can use this framework to analyse the organisation structure and control mechanisms of each parent company, to classify the functional departments and their employees as positive or negative secondary stakeholders, and to identify their impact on project risk and uncertainty.

Corporate Social Responsibility and Investment Efficiency

Using a sample of 21,030 US firm-year observations that represents more than 3,000 individual firms over the period 1998-2012, we investigate the relationship between Corporate Social Responsibility (CSR) and investment efficiency. In consistency with our expectations that high CSR firms enjoy low information asymmetry and high stakeholders solidarity (stakeholders theory), we find strong and robust evidence that high CSR involvement decreases investment inefficiency and consequently increases investment efficiency. Moreover, our findings suggest that CSR components that are directly related to firms’ primary stakeholders (e.g. employees’ relations, product characteristics, environment, and Diversity) are more relevant in reducing investment inefficiency as compared to those related to secondary stakeholders (e.g. human rights and community involvement). Finally, additional results show that the effect of CSR on investment efficiency is more pronounced during the subprime crisis. Taken together, our results highlight the important role that CSR plays in shaping firm's investment behavior and efficiency.

External environment, the innovating organization, and its individuals: A multilevel model for identifying innovation barriers accounting for social uncertainties

Minimizing factors (barriers) disrupting innovation is a key to success. Drawing on stakeholder theory and dynamic capabilities, we propose the EOI barrier model for identifying barriers at multiple levels of analysis: the external environment (external stakeholders), the organization (managerial levers based on dynamic capabilities) and the individual (employees' attitudes and abilities, management commitment). By applying this model to the German biotechnology industry, we examine how barriers manifest themselves in specific settings and demonstrate the context specificity of barriers. Using interview data, we identify 39 barriers across the three levels of analysis. The findings highlight the importance of secondary stakeholders.

Drivers of Supplier Sustainability: Moving Beyond Compliance to Commitment

Mounting pressure for sustainable business practices has led to a greatly increased focus on highlighting sustainability drivers throughout the supply chain. While the literature has concentrated on why downstream original equipment manufacturers (OEMs) and retailers become “sustainable,” much less is known regarding why and how upstream suppliers implement sustainability practices. Based on findings from a cross‐case analysis of eight first‐tier (FT) suppliers and an integration of resource dependency theory (RDT), this study explores the drivers and mechanisms of FT supplier engagement in sustainable supply chain management. Suppliers need to understand the sustainability priorities of customers and stakeholders to derive the effective focus and depth of further upstream integration with subsuppliers. Therefore, the integration between the two functions that manage the relevant external interfaces, namely marketing (downstream and stakeholder communication) and procurement (upstream), appears to be the essential cornerstone to move beyond FT supplier compliance to actual commitment to sustainability practices. We present findings on how (1) stakeholder‐related, (2) process‐related, and (3) product‐related drivers influence the choice and effectiveness of the procurement–marketing integration (PM integration) mechanisms. Stakeholder pressures are considered to be the principal drivers of sustainability efforts. However, on their own, they rarely provide sufficient grounds for permanent and embedded PM integration initiatives at FT suppliers. Evidence suggests that suppliers' commitment to PM integration is motivated by the opportunity to leverage sustainability initiatives in their product offerings and sustainability certificates recognizable by customers and secondary stakeholders.

How Do Strengths and Weaknesses in Corporate Social Performance Across Different Stakeholder Domains Affect Company Performance?

AbstractThe existing research on corporate social responsibility (CSR) has largely focused on the positive aspect of corporate social performance (CSP) and company performance (CP) and ignored the relationship between actions that would qualify as negative CSP (or weakness in CSP) towards a stakeholder group and company performance. Using data from the KLD collected over a three‐year period, this study examines the relationship between both CSP weaknesses and strengths and CP across individual stakeholder domains. Results of the study suggest that strengths in CSP related to primary stakeholder domains are associated with superior company performance. However, this relationship is tenuous, at best, in the case of the secondary stakeholder domain. As for weaknesses in CSP, the results suggest that if a firm performs poorly in meeting the expectations of one or more stakeholders it is penalized in the form of poor performance. This finding generally holds true for both primary and secondary stakeholders. Implications of these findings for public policy and businesses planning to address social issues are discussed. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment

Socially responsible investment and financial institution's response to secondary stakeholder requests

In order to gain influence over firms, secondary stakeholders can opt for socially responsible investment (SRI) – an investment approach that uses both financial and non-financial criteria to determine which assets to purchase [Guay, T., J. P. Doh, and G. Sinclair. 2004. “Non-governmental Organizations, Shareholder Activism and Socially Responsible Investments: Ethical, Strategic and Governance Implications.” Journal of Business Ethics 52 (1): 125–139]. In this article, we argue that SRI, besides a tactic to gain influence over firms, can also be seen as a financial institution's characteristic on the basis of which secondary stakeholders can decide to (not) target a financial institution. It is theorized – based on organizational legitimacy theory – that a financial institution's supply of socially responsible financial products (proxied by the number of products and/or assets/deposits managed) signals a financial institution's likelihood of response to specific stakeholder requests. This relationship is theorized to be positive: the more important SRI is to a financial institution, the higher the likelihood of response to such requests.

Product Diversification and Financial Performance: The Moderating Role of Secondary Stakeholders

The challenges firms face increase with their product diversification levels because different product markets possess different sociopolitical issues. We argue that secondary stakeholders, as represented by various nonprofit or non-governmental organizations, serve as agents mitigating the external constraints embedded within sociopolitical environments. Firms should therefore maintain relationships with different secondary-stakeholder scopes commensurate with their product diversification levels in order to enhance financial performance. Analyzing a sample of U.S. Fortune 500 firms during the period from 1996 to 2003, we found that secondary stakeholders play a positive moderating role in the relationship between product diversification and financial performance. Furthermore, this moderating effect was stronger in the case of unrelated diversification than in related diversification.

The Ontario Christian Gleaners: A Case Study of a Stakeholder-Engaged Organizational Strategy

The Ontario Christian Gleaners (OCG) gathers, dries, and distributes produce destined to be waste and creates value by processing dried soup mixes and fruit snacks using volunteer labour. This case study examines the roles of relationships in the OCGs strategy, operations, and management using a strategic management framework that incorporates value creation and trading. Data was collected from secondary sources, site visits, and interviews. The case examines how relationships with primary and secondary stakeholders are managed to create value. Primary stakeholders are individuals, groups, and organizations with formal, regular, contractual or transactional relationships with an organization. At OCG they include donors of vegetables and fruit, supplies like pails, and services like free waste tipping; communities that receive the dried soups, fruits, shipping barrels, and pails; mission and relief organizations that raise funding and distribute the food and the volunteers who donate their time. Secondary stakeholders do not have regular relationships with an organization but may be affected by its actions or affect its actions indirectly through their activities in the market or society. At OCG secondary stakeholders include those who receive soup; interest groups such as food businesses, consumer or environmental organizations; the earth that supplies the agricultural and food resources; the media; the government that oversees the charitable status requirements and food safety legislation; food banks and others who have similar missions to feed the hungry; and finally educational, social, and health institutions who have goals that intersect with those of the OCG.

Business collaboration with universities as an example of corporate social responsibility - a review of case study collaboration methods

Corporate social responsibility (CSR) is a concept which is gaining in popularity and is being included in the strategies of more and more companies. Social and environmental concerns, as well as cooperation with stakeholders which is also linked to the concept of sustainable development, are becoming part of the mission statements of numerous companies. The question arises, however, whether CSR is merely a strategic concept, or if it is accompanied by specific actions. The aim of this article is to answer the following questions: What does CSR really mean in hard economic times? Is cooperation between business and stakeholders just a declaration included in company strategies as an element of CSR, or is it an actual practice implemented in everyday activities? What barriers exist to such cooperation? The above issues will be discussed on the basis of the relationship between business and academia in respect of stakeholders and the social dimensions of CSR. The paper is divided into four sections. The first section describes the corporate social responsibility that relates to the economic, legal, ethical and philanthropic expectations which society has of companies, and which indicates the activities of companies which fulfil these stakeholder expectations. Universities are one of the business stakeholders within the social responsibility approach, an external and secondary stakeholder which is not critical to a company's survival. The second section discusses the case study method as a teaching method whereby collaboration between universities and busines is required to develop and apply this method during the educational process. University-business collaboration in this field gives an opportunity to fulfil the postulates of social responsibility through its impact on the quality of education. The next part of the paper analyses the case study of university- business collaboration in preparing case studies for educational purposes in Poland. Specific problems are discussed which indicate the constraints on collaboration between businesses and universities. The last section comprises conclusions and discussions. The main point of the discussion is that, on a declarative level, corporate social responsibility is a common element in companies' business strategies, but on an operational level collaboration with stakeholders as part of CSR does not easily transform into practical action. (original abstract)

Corporate social responsibility: Stakeholders influence on MNEs’ activities

This research attempts to examine how specific stakeholder groups influence multinational enterprise (MNE) corporate social responsibility (CSR) practices in South Korea. Generally speaking, the results show that both primary (e.g., consumers, ‘internal managers and employees’ and business collaborators) and secondary stakeholders (e.g., governments, media, local community and NGOs) positively influence MNEs’ CSR. Contrary to previous research, this work also demonstrates that business collaborators have a negative and significant effect on MNEs’ CSR. Based on the findings this paper wishes to offer a framework for MNEs to thoroughly consider the impact of stakeholders when drawing a picture for their CSR strategy. Further, this work also hopes to contribute to current discussions in the area of CSR by bringing a new stream of research into the international business field. In addition, this work strives to provide useful and practical implications for MNEs wanting to operate in the South Korean market.

Stakeholder pressure and hotel environmental performance in Accra, Ghana

Purpose– The purpose of this paper is to examine the extent to which primary and secondary stakeholders influence the environmental performance of hotels in Accra and whether size of hotel moderates stakeholder influence on the environmental performance of hotels.Design/methodology/approach– Environmental performance of the hotels was based on 33 variables in ten key areas of environmental management in the literature. Survey questionnaires were self-administered to a stratified random sample of managers of different categories of hotels in Accra.Findings– The findings point to the fact that primary stakeholders such as customers and board of directors had a more significant influence on the environmental performance of hotels while size of hotel moderates the effect of stakeholders on the environmental performance of hotels.Research limitations/implications– Future research should focus on unearthing other drivers of environmental performance of especially small to medium hotels as well as the obstacles to environmental management in such organizations.Practical implications– It is vital for hotels to manage the pressures exerted by stakeholders.Originality/value– In the context of a developing country like Ghana, experiencing sustained growth in hotel investment, governments should encourage voluntary environmental programmes to enhance environmental performance of hotels instead of regulations by state agencies.

The impact of stakeholder heterogeneity on risk perceptions in technological innovation

Managing risk has been widely acknowledged as a crucial managerial task in the development of new technology. More recently, the acceptance of new technologies has increasingly been influenced by secondary stakeholders, some of which are difficult to identify, or whose concerns are not easily reconciled. This paper develops a conceptual framework based on the management of technology and research & development literature, stakeholder theory, risk and social judgment to describe how traditional approaches based on reducing uncertainties through estimating probabilities may not work for social uncertainties; different heuristics are needed to understand and resolve such heterogeneous stakeholder perspectives. We contribute to the discourse by describing how risk perceptions among stakeholders vary, and how this may change over time. The framework suggests that the perception of primary stakeholder towards a specific innovation is ‘Standard’ when information is well known, but becomes riskier when information is unclear. For secondary stakeholders, when there is a low degree of imperfect information, the stakeholder relationship is an ‘Irritant’ but becomes increasingly ‘Dangerous’ when information becomes ambiguous. We conclude with implications for management and future research.

The Heterogeneous Impact of Corporate Social Responsibility Activities That Target Different Stakeholders

We aggregate different dimensions of corporate social responsibility (CSR) activities following the stakeholder framework proposed in Clarkson (Acad Manag Rev 20(1), 92–117, 1995) and present consistent evidence that CSR strengths targeting different stakeholders have their unique impact on firm risk and financial performance. Institutional CSR activities that target secondary stakeholders are negatively associated with firm risk, measured by total risk and systematic risk. Technical CSR that target primary stakeholders are positively associated with firm financial performance, measured by Tobin’s Q, ROA, and cash flow returns. Our results, based on a sample of S&P 500 component firms over the period of 1995–2009, are consistent with the risk management view of “altruistic” CSR activities and with the stakeholder salience theory. We also show that the impact of CSR activities on risk varies with the ethical climate, as proved in our subsample analyses on pre- and post-Sarbanes–Oxley periods. Our empirical analyses mitigate possible omitted variables and endogeneity concerns that are often overlooked in previous research. Our findings are robust to alternative CSR measures, to alternative risk and performance measures, and to alternative estimation methods.

The Heterogeneous Impact of Corporate Social Responsibility Activities that Target Different Stakeholders

We aggregate different dimensions of corporate social responsibility (CSR) activities following the stakeholder framework proposed in Clarkson (1995) and present consistent evidence that CSR strengths targeting different stakeholders have their unique impact on firm risk and financial performance. Institutional CSR (ICSR) activities that target secondary stakeholders are negatively associated with firm risk, measured by total risk and systematic risk. Technical CSR (TCSR) that target primary stakeholders are positively associated with firm financial performance, measured by Tobin’s Q, ROA, and cash flow returns. Our results, based on a sample of S&P 500 component firms over the period of 1995-2009, are consistent with the risk management view of “altruistic” CSR activities and with the stakeholder salience theory. We also show that the impact of CSR activities on risk varies with the ethical climate, as proved in our sub-sample analyses on pre- and post-Sarbanes-Oxley periods. Our empirical analyses mitigate possible omitted variables and endogeneity concerns that are often overlooked in previous research. Our findings are robust to alternative CSR measures, to alternative risk, and performance measures, and to alternative estimation methods.

The effect of pressure from secondary stakeholders on the internalization of ISO 14001

Abstract Independent third party certification has been proposed as a governance mechanism to control for unobservable practices of firms, such as green practices. Although showing some promise, it has been also argued that the challenge of independent third party certification is to force firms to embrace certifications in substance (hence to internalize the certifications in daily practice) not only to adopt certifications in a symbolic manner. This paper investigates whether the pressure from secondary stakeholders can assist with this challenge. We study this problem in the context of ISO 14001 certification. Based on a study of a sample of 328 Australian and New Zealand firms, we found that ISO 14001 certificate is being accepted by secondary stakeholders as a sufficient signal of firms' environmental efforts. In other words, firms, which experience pressure from secondary stakeholders to adopt the standard, find reputational benefits from the mere fact that they are certified. At the same time, the study also shows that the pressure from secondary stakeholders is not contributing to the internalization of ISO 14001. Firms do not put extra effort into the management of their environmental systems just because they experience stakeholders' pressure to get certified. In line with the findings from other studies, we found that firms that internalize ISO 14001 do also report environmental benefits such as reduced pollution or reduced energy consumption yet the pressure from secondary stakeholders is not contributing to such improvements.

Students and Information Literacy: High School and Postsecondary Perspectives

Using current research and professional standards, the authors discuss the importance of information literacy skills at all educational levels. Recent research, as well as anecdotal evidence from students, librarians and teachers, indicates that students lack knowledge of research process steps and rely too heavily on general and non-vetted sources. Studies show that students default to these sources in an attempt to complete assignments quickly and demonstrate of a lack of knowledge regarding topic development, source evaluation and ethical use. Policy issues addressed include the need for K-12 information literacy instruction by qualified library/media professionals, cooperation between secondary and postsecondary stakeholders and the need for information skills instruction for pre-service teachers.

The mediating role of environmental innovation in the relationship between environmental management and firm performance in a multi-stakeholder environment

Nowadays, firms are increasingly challenged to bridge potentially conflicting economic interests of primary commercial stakeholders and sustainability demands from secondary non-commercial stakeholder groups. While a number of firms view investments in environmental management as disconnected from their value-creating activities, others have reported achieved cost efficiency and differentiation advantages. Prior research suggests that environmental innovation might be the missing link between environmental management and firm performance. However, the mediating effect of environmental innovation in the relationship between environmental management and a firm's performance had not been empirically tested so far. Our paper provides a contribution by conducting an empirical investigation into this possible mediating effect. Although the presumed mediating role of environmental innovation suggests that it is influenced by internal environmental management, environmental innovation literature is especially concerned with the role of external stakeholders in environmental innovation. This study investigates the role of the engagement of stakeholders such as supply chain partners, industry, and public authorities in environmental impact reduction. We hypothesise that environmental innovation positively mediates the relationship between environmental management and firm performance, and that the engagement of stakeholders has a positive impact on environmental innovation. The research model was tested with a variance-based structural equation model using data from 90 Dutch food and beverage firms. The results confirm the positive mediating effect of environmental process innovation on the relationship between environmental management and cost efficiency advantage. Environmental product innovation contributes to a differentiation advantage but it is not significantly influenced by environmental management. So we could not support a positive mediating effect of environmental product innovation on the relationship between environmental management and differentiation advantage. Instead, environmental collaboration with supply chain partners has a strong positive impact on environmental product innovation. It also positively influences environmental process innovation but this influence is much weaker than the influence of internal environmental management. Our findings can assist managers in their decision making regarding the implementation of environmental innovations and environmental collaboration with external parties. The study is also relevant to policy makers as a tool to assess the appropriateness of their policy.

Housing Market Renewal and Demolition in England in the 2000s: The Governance of ‘Wicked problems’

This paper considers some of the issues raised by the governance of housing market renewal, and more specifically demolition, in areas of England suffering from long-standing economic decline and housing market weakness. It examines the experiences of the Housing Market Renewal (HMR) Pathfinder initiative in England, which ran from 2003 to 2011. It reviews some of the strands in the critique of the programme and suggests that they may have tended to overstate the professional and institutional power of the agencies involved to ‘deliver’ their programmes in the face of media or community resistance. On the basis of secondary analysis and stakeholder interviews, the paper suggests that the underlying fragility of the ‘partnership’ governance model on which HMR was founded caused a retreat from demolition as an option in housing market restructuring and wider uncertainty about the focus of the programme – they were ‘wicked problems’ that were difficult to manage. These problems were compounded first by the housing market impacts of global financial crisis from 2008 and the election of a hostile central government in 2010, leading to the premature closure of the HMR programme in March 2011. In conclusion, the paper considers whether it is likely that any future regeneration programme incorporating even modest levels of demolition will be attempted within a ‘partnership’ model of governance in areas of housing market weakness.

Opportunism and environmental management systems: Certification as a smokescreen for stakeholders

This paper sets out to explain how the implementation of an environmental management systems (EMS) conditions the way firms respond to environmental pressures exerted by their stakeholders. While the most common approaches to be found in the literature consider the certification of such systems to be an indicator of proactivity and cooperation with stakeholders, this article posits that it is also a mechanism firms use to discriminate between stakeholders, allowing firms to react to the pressure of certain stakeholders only. Specifically, the analyses conducted on a sample of 3748 plants reveal that the implementation of an EMS responds to pressure from stakeholders, but once this system has been certified a firm's environmental actions basically respond to the pressure from internal primary stakeholders, ignoring pressures from external primary and secondary stakeholders and regulators. The key element in the theoretical line of reasoning regarding these results is the opportunistic behavior associated with certification, given that the certification by itself represents incomplete information. Thus, an EMS can serve as a valuable shield against a majority of stakeholders, since only the pressure of those stakeholders who can verify the effects of such pressure will have an influence on the environmental behavior of firms with a certified EMS.

Compensating Outside Directors with Stock: The Impact on Non-Primary Stakeholders

Two obvious trends in corporate governance include broadening board accountability beyond shareholders’ interests and paying outside directors with equity compensation (stock and stock options). By integrating common agency and instrumental stakeholder theories, we examine the effect of stock compensation on secondary stakeholders and a firm’s participation in social issues, two areas where interests are less aligned with shareholder value. Consistent with our predictions, we found that while stock compensation may be an effective way to align directors’ goals to those of shareholders, it has adverse effects on important non-shareholder constituencies in the company’s operating environment.