Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.

This research paper suggests that due to the changing nature of the firm in today’s business world, viewing shareholders as the sole residual claimants is an increasingly tenuous description of the actual relationships among a firm’s various stakeholders. Thus, a shareholder wealth perspective is increasingly unsatisfactory for the purpose of accurately answering the two fundamental questions concerning the theory of the firm: that of economic value creation, and the distribution of that economic value. The thesis of the current paper is that examining the firm from a property rights perspective of incomplete contracting and implicit contracting provides a solid economic foundation for the revitalization of a stakeholder theory of the firm in strategic management and in expanding the resource-based theory of the firm. In order to make progress in strategic management, a clearer conceptual and empirical understanding of implicit contracting is required. The perspective outlined in this research paper provides for a more accurate direction towards both measuring economic value creation, and analyzing the distribution of that value. It is also submitted that such a perspective has important implications for corporate governance, particularly when managers must balance the legitimate and conflicting claims among stakeholders to achieve the goal of enhancing economic value.

Main Author: Asher, Cheryl.
Other Authors: Mahoney, James M., Mahoney, Joseph T.
Format: Villanova Faculty Authorship
Language: English
Published: 2005
Online Access: http://ezproxy.villanova.edu/login?url=https://digital.library.villanova.edu/Item/vudl:173854
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dc_source_str_mv Journal of Management and Governance 9, 2005, 5-32.
author Asher, Cheryl.
author_facet_str_mv Asher, Cheryl.
Mahoney, James M.
Mahoney, Joseph T.
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Mahoney, James M.
Mahoney, Joseph T.
author_s Asher, Cheryl.
spellingShingle Asher, Cheryl.
Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
author-letter Asher, Cheryl.
author_sort_str Asher, Cheryl.
author2 Mahoney, James M.
Mahoney, Joseph T.
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Mahoney, Joseph T.
dc_title_str Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
title Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
title_short Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
title_full Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
title_fullStr Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
title_full_unstemmed Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
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dc.title Towards a Property Rights Foundation for a Stakeholder Theory of the Firm.
dc.creator Asher, Cheryl.
Mahoney, James M.
Mahoney, Joseph T.
dc.description This research paper suggests that due to the changing nature of the firm in today’s business world, viewing shareholders as the sole residual claimants is an increasingly tenuous description of the actual relationships among a firm’s various stakeholders. Thus, a shareholder wealth perspective is increasingly unsatisfactory for the purpose of accurately answering the two fundamental questions concerning the theory of the firm: that of economic value creation, and the distribution of that economic value. The thesis of the current paper is that examining the firm from a property rights perspective of incomplete contracting and implicit contracting provides a solid economic foundation for the revitalization of a stakeholder theory of the firm in strategic management and in expanding the resource-based theory of the firm. In order to make progress in strategic management, a clearer conceptual and empirical understanding of implicit contracting is required. The perspective outlined in this research paper provides for a more accurate direction towards both measuring economic value creation, and analyzing the distribution of that value. It is also submitted that such a perspective has important implications for corporate governance, particularly when managers must balance the legitimate and conflicting claims among stakeholders to achieve the goal of enhancing economic value.
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