The Relevance of Stakeholders in an International Context

The Relevance of Stakeholders in an International Context

Jaime Guerrero-Villegas (Pablo de Olavide University, Spain)
Copyright: © 2019 |Pages: 19
DOI: 10.4018/978-1-5225-5781-4.ch010

Abstract

The study of the stakeholders is key to a firm's survival and success. This chapter serves as a point of reference for managers by providing a better understanding of stakeholder theory and of the different groups of stakeholders. Additionally, the chapter analyzes the international scenario characterized by globalization and a high level of competitiveness in order to understand the role played by specific stakeholders such as shareholders, employees, governments, and non-governmental organizations. After reading this chapter, readers should be able to understand the basic principles of stakeholder theory; to identify the different groups of stakeholders, analyzing the role that they play in the firm; to understand the motives which push firms to operate internationally and the different methods that they can use to carry this out; and to reflect on the key stakeholders in an international context.
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Stakeholder Theory

The “stakeholder” concept has become very popular in the last two decades (Friedman & Miles, 2006). This term has been broadly used by governments, non-governmental organizations and, especially, in the business field to delimitate the set of internal and external actors that have influence on the activity of firms. In spite of being a widely known term, there is no clear and generally accepted definition of what this term really means. More than 60 different conceptualizations of the term of “stakeholder” can be found (Bryson, 2004; Buchholz & Rosenthal, 2005; Friedman & Miles, 2006; Pesqueux & Damak-Ayadi, 2005). The countless definitions and differing emphases have brought about diverse conceptual interpretations. However, in general terms, the underlying assumption of the stakeholder concept is that a company should take into consideration the needs, interests and influences of people and groups who either impact on, or may be impacted on, by its policies and operations (Frederick et al., 1992). Basically, to understand the stakeholder concept, three fundamental factors should be considered (Clarkson, 1995): (1) the organization, (2) the other actors and (3) the nature of the company-actor relationships.

The first important work in relation to stakeholder theory was conducted by Edward Freeman (1984). This author is considered a true pioneer in exploring the concept of stakeholders, and this has led to a large majority of studies adopting the definition put forward by him. For Freeman the stakeholders are: “Any group or individual who can affect or be affected by the achievement of the organization’s objectives” (Freeman, 1984, p. 46).

The significance of Freeman’s book lies in the fact that he is the first scholar to formulate a cohesive theory on stakeholder management (Rowley, 1997). The book was written in the early 80s, a period of economic turmoil and turbulent changes. Freeman argues that in a chaotic environment characterized by stockholder activism, foreign competition, newly developing cultural imperatives, a politicized international supply of raw materials, consumer activism, an expansion of government activities in business, and an increase in special interest groups, there is a need for a new strategic approach to business management. Freeman further argues that the new model that can provide essential tools to managers in this changing environment is the “Stakeholder Model” (see Figure 1). Freeman believes that each of these stakeholders is necessary for the success of the organization and, inversely, that they also have stakes in the organization. Freeman agrees that this depiction of the stakeholder model is simplistic and static. In reality, the picture is further complicated as stakeholders have varying influences and roles that are subject to change over time, each stakeholder could be further divided into more categories and, finally, there can be an interconnectedness between various stakeholders.

Figure 1.

Stakeholders of a large organization

978-1-5225-5781-4.ch010.f01
Source: Freeman, 1984, p. 55

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