The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment
47 Pages Posted: 12 Nov 2013 Last revised: 18 Oct 2014
Date Written: August 19, 2014
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 examine the mechanisms through which stakeholder orientation fosters innovation. In particular, we argue and provide evidence suggesting that stakeholder orientation sparks innovation by i) promoting a secure work environment that is conducive to experimentation, and ii) enhancing the satisfaction of various stakeholders.
Keywords: innovation; stakeholder view; long-term orientation; constituency statutes; difference-in-differences
JEL Classification: O31, O32, M14
Suggested Citation: Suggested Citation