Caring about firm stakeholders: towards a theory of proactive stakeholder management

Firms differ in the level of engagement with their stakeholders, and while some firms care more broadly and actively about their constituencies, others fail to be receptive to societal demands. To date, however, theoretical insights explaining these differences are fragile and inconsistent. In this paper, we present a theoretical model that, focusing on the primary role of executives as decision-makers, outline the conditions at the organizational level facilitating or inhibiting the intensity of Proactive Stakeholder Engagement (PSE). We argue that managers’ ability to explore different practices in an attempt to learn about and meet stakeholders’ needs depends on the level of explorative capacity, managerial empowerment, and the salience of PSE related criteria in the incentive alignment system. We further postulate the presence of factors within the firm (resource slack), competitive environment (environment dynamism), and manager level (individual values) that moderate these dynamics. Finally, we propose several scenarios that consider the combined or interactive effect of the three predictors on the firm’s PSE