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Impact of stakeholder orientation on innovation: evidence from the natural experiment

Journal

Management Science

Subject

Strategy and Entrepreneurship

Publishing details

Management Science 2016 Vol 62:7 p 1982-2001

Authors / Editors

Flammer C;Kacperczyk A

Biographies

Olenka Kacperczyk

Publication Year

2016

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 argue and provide evidence suggesting that stakeholder orientation sparks innovation by encouraging experimentation and enhancing employees’ innovative productivity. Finally, we find that the positive effect of stakeholder orientation on innovation is larger in consumer-focused and less eco-friendly industries.

Keywords

Innovation; Stakeholder view; Long-term orientation; Constituency statutes; Difference-in-differences

Available on ECCH

No


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