Stakeholder Relationship Bonds

• DOI: http://doi.org/10.1111/joms.12182
• Date: 01 November 2016
• Author: Douglas A. Bosse,Richard Coughlan
• Published date: 01 November 2016

Stakeholder Relationship Bonds

Douglas A. Bosse and Richard Coughlan

University of Richmond

ABSTRACT Scholars and managers continue to seek a better explanation for the behaviours

displayed by various stakeholders. An enhanced understanding of the drivers of these

behaviours ought to improve an organization’s ability to appropriately manage relationships

with stakeholders, thereby improving firm performance. This paper provides a detailed look at

the concept of a relationship, from the perspective of the stakeholder, by focusing on the

perceived psychological bonds that drive a stakeholder to decide whether to continue a

relationship with the firm and, if the relationship does continue, how much pro-relationship

behaviour to exert. Our analysis works out how the strength of the perceived psychological

bond is measured and establishes the conditions under which bonds will be broken. We also

develop conditions that either promote or quash stakeholders’ pro-relationship behaviour.

Keywords: bonds, continuance, firm performance, pro-relationship behaviour, relationships,

stakeholder theory

INTRODUCTION

Stakeholder theory suggests the central challenge of value creation is productively man-

aging relationships with stakeholders who affect and are affected by the firm’s activities

(Freeman, 1984; Freeman et al., 2010). A ‘core question’ of the theory is focused on the

‘kinds of relationships [managers] want and need to create with their stakeholders’

(Freeman et al., 2004, p. 364). Given the centrality of relationships to this theory, it is

perhaps surprising that the causes and effects of decisions made when managing individ-

ual stakeholder relationships have not been explored in depth (Freeman et al., 2010;

Friedman and Miles, 2002; Jones, 2011; Laplume et al., 2008). One exception in this lit-

erature argues firms interact with their stakeholders in consistent patterns according to

their identity orientation, which is an organization-level concept (Brickson, 2007). In a

recent review, however, Jones (2011) argues for expanding stakeholder theory to better

explain the concept and inner workings of relationships. He concludes:

Address for reprints: Richard Coughlan, Robins School of Business, University of Richmond, Richmond,

VA 23173, USA (rcoughla@richmond.edu).

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C2016 John Wiley & Sons Ltd and Society for the Advancement of Management Studies

Journal of Management Studies 53:7 November 2016

doi: 10.1111/joms.12182

‘It would appear that research that examines the actual nature of the relationships

in question ... will have to be done. [...] I believe that the greatest gains in our

understanding of the relationship between good stakeholder management and

improved financial performance will be found at this level of analysis. [...] Instead

of examining company policies and specific actions, researchers should be examin-

ing the content and nature of the relationships themselves...’’ (p. 60)

We agree it is time to more deeply understand the relationship construct itself – by iden-

tifying and explaining ‘key dimensions of each stakeholder relationship’ (a need identi-

fied in the review by Freeman et al., 2010, p. 287). Our approach in this paper is to

examine relationships from the point of view of a single person who is a stakeholder to a

firm. This approach heeds the call for strategy researchers to examine ‘lower-level

constituent units when explaining higher levels of analysis’ (Barney and Felin, 2013,

p. 144) and to develop models that ‘take into account the interactional and relational

factors that might influence preferences, collective decision making, and aggregation’

(p. 141).

We stand on the shoulders of social psychologists to develop a model that is applicable

for explaining how an individual person (a ‘subject’) perceives his relationship with

another party (a ‘target’ that can be at one of many units of analysis including another

person, a team, or a firm). For clarity of exposition and parsimony, we present our entire

model using as the focal subject an individual person who is a stakeholder to a firm. As

is often the case, this individual person might not be acting entirely on her own behalf;

she might be engaging with the target in a boundary-spanning role as representative of

a larger stakeholder group or organization. It is accepted that the nature of stakeholder

relationships can be bidirectional: for example, a customer is a stakeholder to a given

supplier, and vice-versa. Accordingly, our model can ultimately be applied to both

‘sides’ of a stakeholder relationship one at a time, but we do not propose the perceptions

of a focal subject (individual person) on each ‘side’ of the relationship are mirror images.

Building our model of stakeholder relationships from the level of individual subjects

allows for the aggregation of perceptions from individuals to groups to organizations, as

appropriate, to help understand business-to-business relationship settings. The recipro-

cal nature of the aggregation process itself, however, is a complex interaction of individ-

uals’ contextual authority and influence that goes beyond the scope of our present work.

This complexity, coupled with the fact that the term relationship is used so frequently

in everyday language (Reis et al., 2000), may explain why relationship, as a unit of anal-

ysis, has not been aptly scrutinized by business scholars. The essence of an interpersonal

relationship can be found in the interactions between two parties. However, a relation-

ship is more than the sum of interactions (Hinde, 1999; Pirson and Malhotra, 2011).

Relationships are also subject to power dynamics affected by, for example, the compari-

son of available alternatives for either the subject or the target and the parties’ percep-

tions of interdependence (Stevens and Fiske, 2000). We argue a relationship requires

individuals to perceive some form of psychological bond and to be motivated to take

some action on behalf of the other party. Thus, to understand stakeholder relationships,

we begin by examining how an individual stakeholder’s perceptions influence his behav-

iours and decisions in a relationship.

1198 D. A. Bosse and R. Coughlan

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C2016 John Wiley & Sons Ltd and Society for the Advancement of Management Studies