Towards a stakeholder theory of strategic management

comments and suggestions. The usual disclaimer applies. This paper is an early draft. Please do not cite without permission. 2 This paper suggests that due to the changing nature of the firm, viewing shareholders as the sole residual claimants is an increasingly tenuous description of the actual relationships among a corporation‟s various stakeholders. Thus, a shareholder wealth perspective is increasingly unsatisfactory for accurately answering the two fundamental questions concerning the theory of the firm: that of economic value creation, and the distribution of this economic value. Examining the corporation from a (team production) property rights perspective of incomplete contracting and implicit contracting provides a foundation for the revitalization of a stakeholder theory of the firm in the strategic management discipline. 3 The two fundamental questions in the history of economic thought concern the theories of economic value and the distribution of this value (Schumpeter, 1954). These questions are also--- or, arguably should be--- the two fundamental questions concerning strategic management. This paper addresses these two fundamental questions based on a property rights foundation for a stakeholder theory of the firm. 1 Property rights theory. Classical property rights theory defines ownership a