Towards a stakeholder theory of the firm in strategic management

By Joe Mahoney (University of Illinois)  

ABSTRACT: This paper suggests that due to the changing nature of the firm, viewing shareholders as the sole residual claimants is an increasingly tenuous description of the actual relationships among a corporation’s various stakeholders. Thus, a shareholder wealth perspective is increasingly unsatisfactory for accurately answering the two fundamental questions concerning the theory of the firm: that of economic value creation, and the distribution of this economic value. Examining the corporation from a (team production) property rights perspective of incomplete contracting and implicit contracting provides a foundation for the revitalization of a stakeholder theory of the firm in the strategic management discipline.

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