Academic journal article Journal of Small Business Strategy

Stakeholder Theory and the Entrepreneurial Firm

Academic journal article Journal of Small Business Strategy

Stakeholder Theory and the Entrepreneurial Firm

Article excerpt

ABSTRACT

This paper offers a typology of a stakeholder theory of the entrepreneurial firm, such that a new lens for entrepreneurial management emerges. We (1) generated a list of purported "theories of the firm" from the literature; (2) applied qualifying criteria; (3) analyzed the list according to two dimensions-stakeholder inclusion and stakeholder equilibration strength-to categorize these theories of the firm into a typology revealing gaps in the theory-of-the-firm literature; and (4) identified research questions for a stakeholder theory of the entrepreneurial firm that raises entrepreneurial management issues.

INTRODUCTION

The purpose of this paper is to offer a typology that suggests the need for and situates a stakeholder theory of the entrepreneurial firm such that a new lens for entrepreneurial management emerges. This task is necessary because there is reason to suppose that: ( 1 ) the distinctive nature of the entrepreneurial firm (Venkataraman, 1997) is directly impacted by stakeholder relationships (Mitchell, 2002a; Stinchcombe, 1965); (2) the contribution of stakeholders to firm value is connected to the entrepreneurial process (Venkataraman, 2002); (3) the individual-directed nature of early-stage companies makes entrepreneurs particularly likely to create more broadly inclusive stakeholder-based firms instead of more narrowly inclusive stockholder-based firms;and (4) the tendency of new firms, through a higher propensity to contain disruptive technologies (Christensen, 1997), will be to mobilize stakeholders that enact revolutionary verses evolutionary change.

We proceed to accomplish our objectives in the following manner. First, we briefly present the theoretical background that gives rise to the opportunity for the introduction of a stakeholder theory of the entrepreneurial firm. second, we identify a representative set of theories of the firm that emerges from our review of the literature. Third, we further examine two key dimensions that we suggest will distinguish a stakeholder theory of the entrepreneurial firm: extent of stakeholder inclusion (from broad to narrow); and level of stakeholder equilibration strength (from weak to strong). Fourth, we review the various implicit and explicit positions of each theory according to both dimensions and the extent of stakeholder inclusion and stakeholder equilibration strength, situating these theories in a typology implied by these two constructs. Finally, we set forth some of the research questions and evaluate the everpresent "so what" question.

BACKGROUND

For the past several years, the distinctive domain of entrepreneurship research has increasingly centered on investigation of the question: "How, in the absence of current markets for future goods and service, (do) these goods and services manage to come into existence?" (Venkataraman, 1997, p. 120). An entrepreneurial theory of the firm is, therefore, expected to explain how the entrepreneur, as an individual, recognizes opportunity in an uncertain environment and, by persuading relevant stakeholders to supply their resources, creates a firm to exploit such opportunity (Dew, Velamuri, & Venkataraman, 2003, p.l). It follows that the success of new firms in overcoming their liability of newness is strongly associated with the extent and quality of stakeholder relationships (Stinchcombe, 1965). Recognition of the importance of variations in extent of stakeholder inclusion suggests "recasting the central purpose of the firm as serving the interest of stockholders to one where it serves the stakeholders" (Venkataraman, 2002, p.54). According to this argument variations in the extent of inclusion (narrowness verses breadth) of stakeholder relationships are therefore likely to be of interest in the suggestion and situation of a stakeholder theory of the entrepreneurial firm.

Furthermore, gathering and aligning the contributions of all stakeholders to increase overall firm value (Venkataraman, 2002, p. …

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