When Does It (Not) Pay to Be Good? Interplay Between Stakeholder and Competitive Strategies
Date
2022-06-26
Authors
He, Ye
Chittoor, Raveendra
Journal Title
Journal ISSN
Volume Title
Publisher
Journal of Management
Abstract
Using the instrumental stakeholder theory lens, we examine how generic competitive strategies influence the link between stakeholder management (SM) and firm financial performance. We develop a framework that highlights the synergistic effects of a differentiation strategy on SM but also the trade-offs between a cost leadership strategy and SM in their consequences for financial performance. We test our theoretical mechanism further by distinguishing between primary and secondary stakeholders, who differ in their degree of firm specificity and instrumentality. We propose that for firms pursuing a low-cost competitive advantage, secondary SM intensifies the trade-offs between SM and financial performance when compared with primary SM, whereas both primary and secondary SM are likely to improve financial performance for differentiators. Empirical analyses using a panel data set of S&P 500 firms over a 15-year period (2005–2019) and a series of robustness tests support our predictions. Our findings highlight important boundary conditions for SM's impact on firms’ financial performance and highlight not only “when SM pays” but also “when SM may not pay.”
Description
We thank Philip Bromiley, Rodolphe Durand, participants at the Strategic Management Society (SMS) 2019 Minneapolis conference, the Administrative Sciences Association of Canada 2019 conference at St. Catharines, and the Stakeholders, Partnerships, and Competitive Advantage workshop at SMS Minneapolis for helpful comments and feedback on earlier versions of this manuscript. We also acknowledge the insightful and constructive comments of the editor Pursey Heugens and the anonymous reviewers.
Keywords
competitive strategies, financial performance, stakeholder management, primary and secondary stakeholders
Citation
He, Y., & Chittoor, R. (2022). When Does It (Not) Pay to Be Good? Interplay Between Stakeholder and Competitive Strategies. Journal of Management. https://doi.org/10.1177/01492063221106433