| This paper addresses the still elusive connection between stakeholder management and competitive advantage by providing a framework of stakeholder management that pushes the chain of causality back to the origins of competitive advantage. I build on Porter's (1991) chain of causality as a meta-theoretic guide for theory development. I explore how a firm's stakeholder management strategy (as part of Porter's managerial choices) interacts with the firm's structure of interdependence (as part of Porter's initial conditions) in a manner that is supportive of organizational efficacy---the firm's ability to produce desired effects or intended results. Instead of looking at the connection between stakeholder management and the bottom line, I argue that stakeholder management impacts efficacy, a driver of competitive advantage.;Hypotheses are tested using a sample of S&P 500 firms and the Kinder, Lydenburg, & Domini (KLD) Scores and Stats datasets, in addition to the CompuStat database. Across multiple study samples and clusters of firms, results show that stakeholder management strategies make the greatest contribution to organizational efficacy when they are aligned with the firm's structure of interdependence. More specifically, a stakeholder management strategy's contribution to organizational efficacy is a function of the deviation---or distance---of its content from the content of an "ideal" stakeholder management strategy for firms that exist in similar environments and structural context.;This study contributes to the strategic management field in multiple ways. First, previous studies of stakeholder management and firm performance test direct relationships between managerial choices and conventional measures of firm performance, while ignoring the drivers, activities, advantages, and positions that contribute to firm performance. By pushing the chain of causality all the way back to the origin, my findings advance the descriptive, explanatory, and predictive capabilities of stakeholder theory. Second, I build on resource dependence theory to explain why firms engage in stakeholder management, how interdependencies constrain and shape the firm's pattern of choices, and how an internally-consistent pattern of choices and conditions is positively associated with a driver of competitive advantage (organizational efficacy). Finally, an empirical contribution of this work is a proposal of how the KLD Scores and Stats datasets can be used to operationalized the relevant managerial choices (stakeholder management strategies) and initial conditions (structures of interdependence) that firms face. |
