Impact and Prospects
Edited by Robert A. Phillips
Chapter 8: Stakeholder Orientation, Managerial Discretion and Nexus Rents
8. Stakeholder orientation, managerial discretion and nexus rents Robert A. Phillips, Shawn L. Berman, Heather Elms and Michael E. Johnson-Cramer A growing research tradition in management studies deals with how firms manage relationships with their various stakeholders. Among the features distinguishing this research tradition from other approaches is its claim to produce managerial theory. Explaining this notion, Donaldson and Preston (1995: 67) write: ‘The stakeholder theory is managerial in the broad sense of that term. It does not simply describe existing situations or predict cause–effect relationships, it also recommends attitudes, structures, and practices that, taken together, constitute stakeholder management.’ In the pursuit of such a theory, stakeholder researchers have often accorded great importance to managerial decisions and actions as factors which shape firm–stakeholder relationships (for example, Freeman, 1984; Berman et al., 1999; Phillips, Freeman and Wicks, 2003; de Luque et al., 2008). When social scientists ask, ‘What effects can a firm’s treatment of its stakeholders have on its performance?’ and ethicists ask, ‘What moral obligations do firms have to treat their stakeholders in certain ways?’ the uniting assumption is that managers (and by extension, their firms) have latitude to choose their course of action in managing these relationships. However, this latitude is not without limits. A few stakeholder researchers have emphasized the role of external factors in influencing firm behavior toward stakeholders. They argue that, because firms exist and function within a constellation of constituencies with varying levels of power (Mitchell, Agle and Wood, 1997), their...
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