How to have the best of both worlds: Value‐based decision‐making through stakeholder value trade‐offs

Abstract

AbstractBy accounting for stakeholders' conflicting values, in this study, we argue that the conceptualization of stakeholder value trade‐offs can theoretically explain how stakeholder‐oriented managers can make value‐based decisions in pursuit of long‐term value creation for all stakeholders. Specifically, drawing on prospect theory and the value trade‐offs framework, we develop a value‐based decision‐making perspective when organizations manage for their stakeholders. Our framework encompasses four types of trade‐offs: taboo, routine, virtuous, and tragic each plays an important role in the value‐creating decision process. This interdisciplinary study proposes that managers should ground their value‐based decisions on the extent to which the chosen trade‐offs are morally justifiable. The study contributes to the current understanding of relationships between organizations and stakeholders from a decision‐making perspective.