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Proceedings of the International Association for Business and Society

Volume 2, 1991

Proceedings of the Second Annual Meeting

Steven N. Brenner, Philip Cochran
Pages 897-933

The Stakeholder Theory of the Firm
Implications for Business and Society Theory and Research

Recently a general theory of the firm has been proposed which has promise of providing considerable stimulation of thought and research. The "stakeholder theory of the firm" draws upon both elements of stakeholder literature and the growing number of economic theories of the firm. This paper: provides a brief description of some alternative economic theories of the firm; presents the stakeholder theory’s four basic propositions; explores arguments which support its validity and usefulness; and indicates how this more general theory of the firm might influence both theory and research in the business and society field. Neoclassical theories of the firm are limited by their assumptions concerning the values and choice processes used by organization members. The stakeholder theory of the firm allows for broader, more diverse choice processes. Yet it can describe neoclassical economics as a special case where economic values and rational choice processes dominate. Such a realization provides a new vantage point from which to develop theories and research in the business and society area.

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