The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment

47 Pages Posted: 12 Nov 2013 Last revised: 18 Oct 2014

See all articles by Caroline Flammer

Caroline Flammer

Boston University

Aleksandra Kacperczyk

Massachusetts Institute of Technology (MIT); London Business School

Date Written: August 19, 2014

Abstract

In this study, we assess the causal impact of stakeholder orientation on innovation. To obtain exogenous variation in stakeholder orientation, we exploit the enactment of state-level constituency statutes, which allow directors to consider stakeholders' interests when making business decisions. Using a difference-in-differences methodology, we find that the enactment of constituency statutes leads to a significant increase in the number of patents and citations per patent. We further examine the mechanisms through which stakeholder orientation fosters innovation. In particular, we argue and provide evidence suggesting that stakeholder orientation sparks innovation by i) promoting a secure work environment that is conducive to experimentation, and ii) enhancing the satisfaction of various stakeholders.

Keywords: innovation; stakeholder view; long-term orientation; constituency statutes; difference-in-differences

JEL Classification: O31, O32, M14

Suggested Citation

Flammer, Caroline and Kacperczyk, Aleksandra, The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment (August 19, 2014). Available at SSRN: https://ssrn.com/abstract=2353076 or http://dx.doi.org/10.2139/ssrn.2353076

Caroline Flammer (Contact Author)

Boston University ( email )

Boston University Questrom School of Business
595 Commonwealth Avenue, Office 634A
Boston, MA 02215
United States

HOME PAGE: http://sites.bu.edu/cflammer/

Aleksandra Kacperczyk

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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