Sailing the Dangerous Waters of Contradicting Stakeholders’ Claims: A Simplified Chart Igor Gurkov, Alexander Settles, and Zakir Saidov

Presentation Overview Introduction to the model Restating the definition of stakeholders Explanation of the interaction between stakeholders Model of dynamic multi-stakeholder model including switching costs Contributions to Stakeholder Research

Introduction Stakeholder Model Resource Based View (RBV) of the Firm Dyadic relationship to network relationship model Dynamic model – multi-period analysis of the stakeholder relationship with switching costs

Definitions of Stakeholders “any group or individual who can affect or is affected by the achievement of the firm’s objectives” (Freeman 1984) “a person, group of persons, organization, network or institution that supplies crucial resource for the very existence of the firm and is capable to claim for an adequate return for the resource supplied” (Gurkov et al., 2011)

Our Definition of Stakeholders means that… Heterogeneous set of suppliers of particular resources - labor, fixed and working capital, raw material, technology solutions, access to public resources and legal approval of activities Stakeholders have contradictory interests to one Stakeholders find mutually acceptable relationships with to the firm Stakeholder have a cost in switching from one firm to another

Resource Based View of the Firm suggests that the firm needs specific capabilities Capabilities to attract and keep the necessary financial resources (securing the input of shareholders); Capabilities to develop new products and to offer such products at competitive prices (securing the input of customers); Capabilities to attract the necessary workforce and to use the people in the most productive way (securing the input of employees)

Six Classes of Stakeholders StakeholdersCostsBenefits FoundersTime, intellectual effort and other efforts, the risks Entrepreneurial rent Other shareholdersRisk, opportunity cost of capital Dividends and increase in the value of assets (TSR) CustomersPerceived price of goodsPerceived use value of goods or services purchased CreditorsRisk loan defaultInterest received on loan EmployeesOperating time, efforts, moral discomfort Material and moral compensation, congruence with organizational climate, rise in employability SuppliersQuality of goods and services supplied Revenue generated from goods and services supplied

Authorities as stakeholders In democratic societies authorities are inclined towards pursuing interests of the most numerous group of stakeholders In “corrupt dictatorships” authorities act as a controlling shareholder In “ideological dictatorships” authorities put their own agenda for the proper corporate citizenship, usually increasing costs

Examples of Exclusive Stakeholders software developers have virtually no suppliers (a computer algorithm may be developed using a pencil and paper), a firm may totally avoid bank loans a firm may have no survived founders or the initial business idea and technologies may change dramatically a firm may prefer to work for a prolonged time without sales, stockpiling its products for a unique market opportunity (this is usual for painters and other independent artists).

Direct and lagged consequences of unlimited pursuit of stakeholders’ claims

Mutual Acceptance Space

Counterbalancing the interests of various stakeholders

Market Forces on Stakeholder Costs

Contributions to the Research Redefining stakeholder as providers of resources Introduction of switch costs and strategic dynamic management of stakeholders Multi-stakeholder management characteristics Allowing for the charting of course to gain the necessary resources while minimizing the costs of acquiring those resources

Thank you for your attention! Igor Gurkov, Alexander Settles,