Stakeholder Theory

Stakeholder Theory

Impact and Prospects

Edited by Robert A. Phillips

Honoring the twenty-fifth anniversary of R. Edward Freeman’s Strategic Management: A Stakeholder Approach, one of the most influential books in the history of business strategy and ethics, this work assembles a collection of contributions from some of the most renowned and widely-cited scholars working in the area of stakeholder scholarship today.

Chapter 9: Stakeholders, Entrepreneurial Rent and Bounded Self-interest

Douglas A. Bosse and Jeffrey S. Harrison

Subjects: business and management, strategic management


Douglas A. Bosse and Jeffrey S. Harrison Entrepreneurship may be envisioned as a process through which an actor (the entrepreneur) attempts to create rent by attracting and combining resources to satisfy a market need (for example, Schumpeter, 1934; Shane and Venkataraman, 2000; Alvarez and Barney, 2007). Throughout this process entrepreneurs must engage stakeholders to provide resources – such as prospective partners, employees, customers, suppliers and financiers – who are often uncertain about the entrepreneur’s probability of success, and give them sufficient motivation to provide their resources to the venture (Freeman, 1984). This can be a challenge because in order to create and appropriate rent the entrepreneur must offer the stakeholders, as a group, less than the value of their combined resources, while at the same time trying to persuade them to engage in the venture (Rumelt, 1987; Coff, 2010). A purely economic perspective to this entrepreneurial problem would suggest that the entrepreneur should seek out those initial stakeholders who are expected to provide their resources at the lowest cost, bargain to extract the lowest cost, and then withhold any information from them that might cause them to want a better deal in the future. The reasoning here is simple to understand if we assume that the entrepreneur is purely selfinterested. Based on this assumption, the rational decision is to maximize each transaction without consideration of the interests of the stakeholders. We question whether this assumption provides an appropriate foundation upon which to understand the entrepreneur’s resource acquisition problem and whether it is...

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