Stakeholder Theory, Value, and Firm Performance

TLDR

Value has traditionally been reduced to economic returns, but stakeholder theory offers a broader lens for understanding the diverse value stakeholders seek. The study develops a four‑factor definition of value that extends beyond economic returns to capture stakeholder‑desired outcomes. The authors distinguish this perspective by comparing it to three other popular performance frameworks. The paper recommends performance metrics aligned with the four‑factor view, highlighting factors that most closely build stakeholder value and improve measurement and managerial creation of value.

Abstract

ABSTRACT: This paper argues that the notion of value has been overly simplified and narrowed to focus on economic returns. Stakeholder theory provides an appropriate lens for considering a more complex perspective of the value that stakeholders seek as well as new ways to measure it. We develop a four-factor perspective for defining value that includes, but extends beyond, the economic value stakeholders seek. To highlight its distinctiveness, we compare this perspective to three other popular performance perspectives. Recommendations are made regarding performance measurement for both academic researchers and practitioners. The stakeholder perspective on value offered in this paper draws attention to those factors that are most closely associated with building more value for stakeholders, and in so doing, allows academics to better measure it and enhances managerial ability to create it.