Towards a Stakeholder Theory of Strategic Management

This paper suggests that due to the changing nature of the firm, viewing shareholders as the sole residual claimants is an increasingly tenuous description of the actual relationships among a corporation’s various stakeholders. Thus, a shareholder wealth perspective is increasingly unsatisfactory for accurately answering the two fundamental questions concerning the theory of the firm: that of economic value creation, and the distribution of this economic value. Examining the corporation from a (team production) property rights perspective of incomplete contracting and implicit contracting provides a foundation for the revitalization of a stakeholder theory of the firm in the strategic management discipline.