Submitted Papers

Stakeholder Orientation and Growth Rates

Abstract: This paper examines the causal effect of stakeholder orientation on growth rates utilizing exogenous variation in stakeholder orientation that stems from the staggered implementation of constituency statutes in various US states. Stakeholder orientation’s effect on growth is unclear because it enhances resource access but simultaneously affects resource allocation by introducing ambiguity in the objective function and increasing stakeholder involvement in decision making. Results indicate that firms that orient themselves towards their stakeholders grow and downsize at lower rates. Together with additional analyses, these findings suggest that these firms employ stronger selection criteria, choosing only those opportunities for growth and downsizing that satisfy all relevant stakeholders. Thus, stakeholder orientation changes the growth process, suggesting that stakeholder strategy and growth strategy are highly related.

Submitted to Organization Science

The Limits to Profitable Growth

Abstract: Established theory suggests that growth improves performance until managers cannot combine their day-to-day activities with coordinating growth and further growth reduces performance. This implies an inverted U-shaped relationship between growth rate and profit where the inflection point represents the limits to profitable growth. In this paper, I contribute to the understanding of firm growth by explicating the mechanisms behind this relationship and showing that they can explain many firm differences. Furthermore, I advance the literature empirically by demonstrating that these limits exist and differ substantially across firms. Finally, I clarify the boundary conditions of Penrosian growth theory empirically by exploring how internal capabilities, growth strategy, and external conditions affect inter-firm differences. I provide possible explanations and ideas for future research for these unexplained findings.

Submitted to SMJ Special issue on Question-Driven and Phenomenon-Based Empirical Strategy Research

Stakeholder Orientation and the Limits to Profitable Growth

Abstract: This paper introduces a stakeholder approach to study firms’ profitable growth. It suggests that integrating stakeholder concerns into firm decision-making processes shapes firms’ dynamic process of sensing and seizing growth opportunities by leveraging stakeholder information and resources. However, firms with very high levels of stakeholder orientation may focus excessively on current stakeholders, foregoing opportunities to benefit future ones. We find evidence consistent with these predictions in a global sample of 4,800 firms: stakeholder orientation increases profits from growth as firms move from low to moderate levels, but then reduces them as firms move from moderate to high levels. The data indicates that there might be an optimal level of stakeholder orientation that maximizes profitable growth.

With C. Williams and M. Zollo - Submitted to SMJ

Exploring Conditions for Environmental Legitimacy: Evidence from the Energy Industry

Abstract: Achieving and maintaining environmental legitimacy in the eyes of stakeholders is of strategic importance for firms and one of the reasons why companies engage in environmental initiatives. Given stakeholders build their legitimacy assessment on a combination of multiple, interdependent factors we investigate how different, complex configurations of factors could lead to positive or negative evaluations from stakeholders. Building on prior literature, we identify four main factors: environmental performance, impression management strategies, the adaptation of environmental practices as well as their international scale. Adopting a quasi-inductive approach, we apply a fuzzy set QCA methodology and show that stakeholders’ assessment of environmental legitimacy has indeed a configurational character. Based on our results, we theoretically develop different sets of alternatives for both highly and poorly legitimate typologies. These alternatives indicate that firms can choose among multiple combinations to signal environmental legitimacy, but that “high legitimacy” configurations are not necessarily opposite hands of “low legitimacy” configurations. Thus, our study contributes to our empirical and theoretical understanding of environmental legitimacy and offers, at the same time, important implications for managers.

With E. Bettinazzi, A. Jaqueminet, and K. Neumann - Submitted to AOM New Ways of Seeing Special Research Forum