Academic journal article Asian Social Science

Multi-Period Model for Selection of Stakeholder Engagement Strategies of the Company

Academic journal article Asian Social Science

Multi-Period Model for Selection of Stakeholder Engagement Strategies of the Company

Article excerpt

Abstract

The present study proposes a multi-period model for selection of the most suitable types of engagement strategies of the company with different stakeholders in the context of uncertainty (risk). In the model considered a number of scenarios under which relationships of the company with the stakeholder groups vary periodically. For each scenario periodically predicted the dynamics of changes in the characteristics of such relations, and calculated weighing coefficients of applicability of the type of engagement strategy of the company with each stakeholder group. Coefficients obtained are reduced to integral coefficients based on which, using a generalized criterion that combines the expected value and the mean squared deviation, made the decision on the choice of a particular type of engagement strategies of the company with each stakeholder. This approach allows to select and rank the Pareto-optimal set of types of strategies and delimit the risk tolerance of the decision maker. The model also provides a method of selecting the most suitable type of strategy based on the expected utility criterion. The advantage of the proposed model is that it takes into account the risk tolerance of the decision-maker.

Keywords: multi-period model, stakeholders, stakeholder engagement strategies, generalized criterion, expected utility criterion, deterministic equivalent, risk tolerance

(ProQuest: ... denotes formulae omitted.)

1. Introduction

The stakeholder concept (stakeholder theory), along with neoclassical and agency (shareholder) concept, is one of the three enterprise concepts in the developed economy (while the existence of a variety of other theories of the company (see, for example, (Foss et al., 1998; Kleiner, 2003a; Kleiner, 2008; Kleiner, 2003b; Tambovtsev, 2010; Dietrich & Krafft, 2012).

The origin of the stakeholder theory dates back to the widely acknowledged and often cited work of Freeman, R.E. "Strategic Management: The concept of stakeholders" published in 1984, where the author introduced a new concept "a stakeholder", giving its definition, and proposed to consider the original model of the corporation (company) (Freeman, 1984).

According to the stakeholder concept the activities of the company depend on a wide variety of stakeholders (customers, suppliers, shareholders, managers, employees, and others), with each of the stakeholders having his\her own interests and certain rights to the company control. The concept involves making decisions based on the need to meet multiple and frequently conflicting needs of these stakeholders (Kleiner, 1999).

An extremely important role in the development of the stakeholder concept belongs to the work of Post, J., Preston, L., & Saks, S. (Post et al., 2002) which, in fact, summed up the five-year (1995-2000) project "Rethinking the Corporation", supported by the grant given by Sloan Fond, and laid the foundations for a "new stakeholder approach". According to the authors of this work, the modern corporation serves the center of a network of interconnected elements (stakeholders), each of which contributes (voluntarily or involuntarily) to the results of the company business activities and looks after his\her own interests (or at least the absence of uncompensated damage).

Strictly speaking, the stakeholder theory of the firm can be regarded as an independent direction in research of the general and strategic management. The stream of publications on relevant topics and content continued for about a quarter of the century indicates the theoretical and practical significance of this approach, and at the same time - its incompleteness and partial inconsistency (Tambovtsev, 2008b; Phillips, 2011).

The stakeholder engagement strategies of the company underlie the strategies of all levels (corporate strategy, business strategy, functional and operational strategies). The choice of the set of stakeholder engagement strategies is caused by the company's commitment to long-term balanced relationships with all its stakeholders, for that in the short term the company can deliberately commit the disturbance of the balanced relationships with any stakeholder. …

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