Stakeholder Relations and the Persistence of Corporate Financial Performance

Publication Type

Journal Article

Publication Date

8-2009

Abstract

We examine the effect of a firm's relations with its nonfinancial stakeholders, including its employees, suppliers, customers, and communities, on the persistence of both superior and inferior financial performance. In particular, integrating and extending the resource-based view of the firm and stakeholder management literatures, we develop the arguments that good stakeholder relations not only enable a firm with superior financial performance to sustain its competitive advantage for a longer period of time, but more importantly, also help poorly performing firms to recover from disadvantageous positions more quickly. The arguments are supported by the analysis of a series of first-order autoregressive models. Our findings further suggest that the positive effect of good stakeholder relations on the persistence of superior performance is not as strong as that of some other firm resources, such as technological knowledge, but it is the only factor examined that promises to help a firm recover from inferior performance. Therefore, the role of positive stakeholder relations in helping poorly performing firms recover is found to be more critical than its role in helping superior firms sustain their performance advantage.

Keywords

stakeholder relations, corporate financial performance, sustainability of financial performance

Discipline

Business | Corporate Finance | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Strategic Management Journal

Volume

30

Issue

8

First Page

895

Last Page

907

ISSN

0143-2095

Identifier

10.1002/smj.759

Publisher

Wiley

Additional URL

https://doi.org/10.1002/smj.759

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