When Does It (Not) Pay to Be Good? Interplay Between Stakeholder and Competitive Strategies
Date
2022
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 strat- egies influence the link between stakeholder management (SM) and firm financial perfor- mance. 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 dis- tinguishing 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
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.