FAILURES OF RECIPROCITY AND THE CASE FOR STAKEHOLDER EMPOWERMENT

Stakeholder theorists contend that firms can create value by sharing it with stakeholders because stakeholders reciprocate the additional utility they receive with extra effort. For this to work, stakeholders must be able to recognize and respond to the value being shared with them. We interrogate this reciprocity assumption, and lay out conditions under which firms’ attempts to share value with stakeholders may go unrewarded. In the face of such reciprocity failures, firms will avoid sharing value with stakeholders. We contend that overcoming failures of reciprocity requires firms to move beyond simply managing for stakeholders to empowering stakeholders.