A Stakeholder Approach to Strategic Management

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Darden Graduate School of Business Administration
University of Virginia
Working Paper No. 01-02
A Stakeholder Approach to Strategic Management
R. Edward Freeman
John McVea
This paper can be downloaded without charge from the
Social Science Research Network Electronic Paper Collection at: http://papers.ssrn.com/paper.taf?abstract_id=263511
A Stakeholder Approach to Strategic Management
R. Edward Freeman
John McVea
The Darden School
University of Virginia
Forthcoming in M. Hitt, E. Freeman, and J. Harrison (eds.)
Handbook of Strategic Management, Oxford: Blackwell
The purpose of this chapter is to outline the development of the idea of "stakeholder management" as it has come to be applied in strategic management. We begin by developing a brief history of the concept. We then suggest that traditionally the stakeholder approach to strategic management has several related characteristics that serve as distinguishing features. We review recent work on stakeholder theory and suggest how stakeholder management has affected the practice of management. We end by suggesting further research questions.

A stakeholder approach to strategy emerged in the mid-1980's. One focal point in this movement was the publication of R. Edward Freeman's Strategic Management- A Stakeholder Approach in 1984. Building on the process work of Ian Mitroff and Richard Mason, and James Emshoff [ For statements of these views see Mason and Mitroff,(1982) and Emshoff (1978)]. The impetus behind stakeholder management was to try and build a framework that was responsive to the concerns of managers who were being buffeted by unprecedented levels of environmental turbulence and change. Traditional strategy frameworks were neither helping managers develop new strategic directions nor were they helping them understand how to create new opportunities in the midst of so much change. As Freeman observed "[O]ur current theories are inconsistent with both the quantity and kinds of change that are occurring in the business environment of the 1980's…A new conceptual framework is needed."[Freeman, 1984, pg. 5] A stakeholder approach was a response to this challenge. An obvious play on the word "stockholder", the approach sought to broaden the concept of strategic management beyond its traditional economic roots, by defining stakeholders as "any group or individual who is affected by or can affect the achievement of an organization's objectives". The purpose of stakeholder management was to devise methods to manage the myriad groups and relationships that resulted in a strategic fashion. While the stakeholder framework had roots in a number of academic fields, its heart lay in the clinical studies of management practitioners that were carried out over ten years through the Busch Center, the Wharton Applied Research Center, and the Managerial and Behavioral Science Center, all at The Wharton School, University of Pennsylvania by a host of researchers.

While the 1980's provided an environment that demonstrated the power of a stakeholder approach, the idea was not entirely new. The use of the term stakeholder grew out of the pioneering work at Stanford Research Institute (now SRI International) in the 1960's. SRI's work, in turn, was heavily influenced by concepts that were developed in the planning department of Lockheed and these ideas were further developed through the work of Igor Ansoff and Robert Stewart. From the start the stakeholder approach grew out of management practice. 1

1 Recently, Mr. Giles Slinger has revisited the early history of the idea of stakeholders. Through more extensive interviews, and the examination of a number of historical documents, Slinger rewrites the history as told in Freeman (1984). The essential SRI argued that managers needed to understand the concerns of shareholders, employees, customers, suppliers, lenders and society, in...
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