Managing complex business relationships: small business and stakeholder salience

All business depends on the environment in which it operates and the existence of suppliers, customers and owners. Collectively, these and other groups which interact with the organisation, and whose needs and concerns must be considered, are known as stakeholders. Most research on stakeholder relationships has focused on large, publicly-owned corporations, and little appeared to be known about identity, dynamics, motivation and operations of stakeholder relationships in small business. Stakeholder theory, although mainly focused on large publicly owned corporations, is also highly relevant for small business and is the focus of this study. Two research questions were developed; “Who are the stakeholders in Australian small business?” (RQ1) and “How can relationships between Australian small business and stakeholders be defined?” (RQ2). A multiple-case study approach, where the same process of investigation is repeated in each case, was used to facilitate the understanding of ‘who’ and ‘how’ of stakeholder relationships in context and to allow cross-case comparison, analytical generalisation and formulation of theory. Cases were purposively selected according to potential for yielding insights and understanding into the identity of stakeholders in Australian small business. The interviewees were the key decision maker of a small business with fewer than 20 employees. In six of the eight cases, the interviewee was the owner-manager of the business. All cases were located in the state of New South Wales, Australia. Data collection was by way of face-to-face, interviews that followed a semi-structured interview instrument. It was found that stakeholders of small business can be readily identified and typically include owner-managers, customers, employees, suppliers, family, community and government. These stakeholders can also be ranked and measured in terms of their salience (the combination of urgency, legitimacy and power). In small business, where the key decision maker is typically the owner-manager, the interests of the manager thus align that of the owner, putting into play a mutuality principle and encouraging responsiveness to stakeholders as a strategy to enhance financial performance. This sets small business apart from large business and therefore has implications for policy that aims to support the economically and socially important small business sector