Advancing a system-level perspective in stakeholder theory : insights from the institutional economics of John R. Commons

Abstract

Stakeholder theory is a growing body of scholarly literature at the crossroads of business ethics and strategic management. This literature encompasses two distinct levels of inquiry, the levels of the firm and of the capitalistic system as a whole. At the firm level, stakeholder theory provides insight into the roots of the firm-level competitive advantage, whereas at the system level, it explores how capitalistic business can act as a social institution serving moral goals. Until now, the firm-level and system-level perspectives in stakeholder theory have not been effectively integrated. Drawing on the classical institutional economics of John Commons, the present paper elaborates the distinction between the firm and system levels of stakeholder collaboration and examines how they are interconnected. Stakeholder collaboration is shown to be shaped by larger institutions, such as habits, customs, public purposes, and prevailing perceptions of reasonableness. Whereas the system-level perspective in stakeholder theory focuses on the evolution of these larger institutions, the firm-level perspective explores how these institutions contribute to the emergence of the firm-level competitive advantage, thereby generating evolutionary forces that adjust the larger institutions.