Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility

Academy of Management Review, October 2005

55 Pages Posted: 23 Nov 2005

See all articles by Michael L. Barnett

Michael L. Barnett

Rutgers Business School, Newark & New Brunswick

Abstract

Should corporations serve as agents of social change? For more than 30 years, scholars have attempted to make a "business case" that demonstrates that corporations should because they can earn positive financial returns from social responsibility. However, the business case remains unproven. This paper argues that research on the business case must account for the path dependent nature of firm-stakeholder relations, and develops the construct of stakeholder influence capacity (SIC) to fill this void. SIC helps explain why the effects of corporate social responsibility (CSR) on corporate financial performance (CFP) vary across firms and across time, and so provides a missing link in the study of the business case. This paper distinguishes CSR from related and confounded corporate resource allocations and from corporate social performance (CSP), then incorporates SIC into a conceptual framework that illustrates how acts of CSR are transformed into CFP through stakeholder relationships. This paper also develops a set of propositions to aid future research on the contingencies that produce variable financial returns to investments in CSR.

Keywords: corporate social responsibility, corporate social performance, corporate financial performance, stakeholder influence capacity, stakeholder theory

JEL Classification: M14

Suggested Citation

Barnett, Michael L., Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility. Academy of Management Review, October 2005. Available at SSRN: https://ssrn.com/abstract=853086

Michael L. Barnett (Contact Author)

Rutgers Business School, Newark & New Brunswick ( email )

NJ
United States

HOME PAGE: http://www.business.rutgers.edu

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