The New Stakeholder Theory on Organizational Purpose

Abstract

The new stakeholder theory (NST) grapples with two canonical questions: Which stakeholders are enfranchised in organizations? How is the value created through stakeholder collaboration distributed and experienced by stakeholders? This paper first describes how the NST builds on original stakeholder theory to ask these two specific questions. The defining features of the NST are (i) a broad range of dependent variables, (ii) descriptiveness, (iii) formalized analysis, (iv) boundaries on stakeholder enfranchisement, and (v) analytic links to other established theories. The paper then assesses the assumptions and implications of this theory for understanding organizational purpose. A primary idea is that the NST conceptualizes purpose as originating in the goals, needs, and interests of stakeholders as complex, nuanced actors. Under the NST, the organization is conceived of as a tool—a functionalized construction—through which enfranchised stakeholders pursue a shared purpose that leads to experiences of stakeholder value in terms that are defined by the relevant stakeholders themselves. The survival and profitability of an organization depends on its effectiveness and efficiency as a tool for accomplishing mutual stakeholder aims, which are what define organizational purpose.History: This paper has been accepted for the Strategy Science Special Issue on Corporate Purpose.Funding: Funded by Social Sciences and Research Council of Canada.