A stakeholder based view of firm growth: stakeholder orientation and value creation from growth

Abstract: In this paper I adopt a stakeholder-based view of firm growth to understand why some firms are able to convert operations growth into value creating business while others are not. This view recognizes that the firm’s stakeholders are a team that work together and pool their knowledge, social capital, and resources to create value, and that are all affected by growth. I find that the value firms can create from operations growth in a given period is limited due to non-linearly increasing difficulties with sensing and seizing growth opportunities. However, I find that astrategic orientation towards stakeholders allows firms to better leverage stakeholder resources, but simultaneously shifts focus to current stakeholders so that potential value creating opportunities with other parties might go unnoticed. These findings show that there are limits to the amount of value firms can create from growth, and the way firms orient themselves towards their stakeholders has implications for firm evolution, in particular it affects the firm’s strategic options for growth.